CLS BANK INTERNATIONAL, Plaintiff-Appellee, AND CLS SERVICES LTD.,
`Counterclaim Defendant-Appellee, V. ALICE CORPORATION PTY. LTD., De-
`fendant-Appellant.
`
`UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
`
`2013 U.S. App. LEXIS 9493; 106 U.S.P.Q.2D (BNA) 1696
`
`May 10,2013, Decided
`
`PRIOR HISTORY:
`[*I]
`Appeal from the United States District Court for the
`District of Columbia in No. 07-CV-974, Judge Rosemary
`M. Collyer.
`CLS Bank Int'l v. Alice C o p Pty, Ltd., 768 F. Supp. 2d
`221, 2011 US. Dist. LEXIS 23669 (D.D. C., 2011)
`CLS Bank Int'l v. Alice C o p . Pty. Ltd., 484 Fed. Appx.
`559, 2012 US. App. LEXIS 20906 (Fed. Cir., 2012)
`
`DISPOSITION: AFFIRMED.
`
`COUNSEL: MARK A. PERRY, Gibson, D m &
`Crutcher LLP, of Washington, DC, argued for plain-
`tiff-appellee and counterclaim-defendant appellee on
`rehearing en banc. With him on the brief were BRIAN
`M. BUROKER, MICHAEL F. MURRAY and ALEX-
`ANDER N. HARRIS. Of counsel on the brief was MI-
`CHAEL A. VALEK, of Dallas, Texas.
`
`ADAM L. PERLMAN, Williams & Connolly, LLP, of
`Washington, DC, argued for defendant-appellant on re-
`hearing en banc. With him on the brief were BRUCE R.
`GENDERSON, RYAN T. SCARBOROUGH, STAN-
`LEY E. FISHER and DAVID M. KTUNSKY. Of counsel
`on the brief were CONSTANTINE L. TRELA, JR.,
`Sidley Austin, LLP, of Chicago, Illinois and ROBERT E.
`SOKOHL, Sterne, Kessler, Goldstein & Fox, PLLC, of
`Washington, DC.
`
`NATHAN K. KELLEY, Deputy Solicitor, Office of the
`Solicitor, United States Patent and Trademark Office, of
`Alexandria, Virginia, argued for United States Patent and
`Trademark Office, for amicus curiae on rehearing en
`banc. With him on the brief were BERNARD J.
`KNIGHT, JR., General Counsel, RAYMOND T. CHEN,
`Solicitor, SCOTT C. WEIDENFELLER, Senior Counsel
`
`for Patent Law,
`[*2] and THOMAS E. KRAUSE, Spe-
`cial Counsel for IP Litigation. Of counsel on the brief
`were BETH S. BRINKMANN, Deputy Assistant Attor-
`ney General, SCOTT R. MCINTOSH and MARK R.
`FREEMAN, Attorneys, Appellate Staff, Civil Division,
`United States Department of Justice, of Washington, DC.
`
`STEPHEN R. STITES, Bluemont, Virginia, as amicus
`curiae on rehearing en banc.
`
`JACK E. HAKEN, Philips Intellectual Property and
`Standards, of Briarcliff Manor, New York, for amicus
`curiae, Koninklijke Philips Electronics NV on rehearing
`en banc. With him on the brief were MICHAEL
`FUERCH, PAUL IM, and DAVID SCHREIBER.
`
`PAUL R. JUHASZ, The Juhasz Law Firm, P.C., of Hou-
`ston, Texas, for amicus curiae The Juhasz Law Firm,
`P.C., on rehearing en banc.
`
`CHARLES W. SHIFLEY, Banner & Witcoff, LTD., of
`Chicago, Illinois, for amicus curiae The Intellectual
`Property Law Association of Chicago on rehearing en
`banc.
`
`MICHAEL R. DZWONCZYK, Sughrue Mion, PLLC, of
`Washington, DC, for amicus curiae Sigram Schindler
`Beteiligungsgesellschafi mbH on rehearing en banc.
`
`JULIE P. SAMUELS, Electronic Frontier Foundation, of
`San Francisco, California, for amici curiae Electronic
`Frontier Foundation, et al. on rehearing en banc. With
`her on the [*3] brief was MICHAEL BARCLAY.
`
`CHAlUES R. MACEDO, Amster, Rothstein &
`Ebenstein LLP, of New York, New York, for amicus
`VERSATA EXHIBIT 2001
`VOLUSION v. VERSATA
`CASE CBM2013-00017
`
`

`

`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 2
`
`curiae New York Intellectual Property Law Association
`on rehearing en banc. With him on the brief was MI-
`CHAEL J. KASDAN. Of counsel on the brief was AN-
`THONY F. LO CICERO, New York Intellectual Prop-
`erty Law Association, of Fort Lee, New Jersey.
`
`JOHN D. VANDENBERG, Klarquist Sparkman, LLP,
`of Portland, Oregon, for amicus curiae British Airways,
`PLC, et al. on rehearing en banc.
`
`MATTHEW SCHRUERS, Computer & Communica-
`tions Industry Association, (CCIA) for amicus curiae
`Computer & Communications Industry Association on
`rehearing en banc.
`
`DARYL JOSEFFER, King & Spalding LLP, of Wash-
`ington, DC, for amici curiae Google Inc., et al. on re-
`hearing en banc. With him on the brief was ADAM
`CONRAD, of Charlotte, North Carolina.
`
`GEORGE L. GRAFF, of Briarcliff Manor, New York,
`for amicus curiae Intellectual Property Owners Associa-
`tion on rehearing en banc. With him on the brief were
`RICHARD F. PHILLIPS, ExxonMobil Chemical Com-
`pany, of Houston, Texas and KEVIN H. RHODES, 3M
`Innovative Properties Company, of St. Paul Minnesota.
`
`STEVEN C. SEREBOFF, SoCal IP Law Group LLP, of
`Westlake Village, California, [*4] for amicus curiae
`Conejo Valley Bar Association on rehearing en banc.
`With him on the brief were MARK A. GOLDSTEIN,
`JONATHAN PEARCE and M. KALA SARVAIYA.
`
`PAUL D. CLEMENT, Bancroft PLLC, of Washington,
`DC, for amicus curiae International Business Machines
`Corporation on rehearing en banc. With him on the brief
`was D. ZACHARY HUDSON. Of counsel on the brief
`were MANNY W. SCHECTER and KENNETH R.
`CORSELLO, IBM Corporation, of Armonk, New York.
`
`ANDREW J. PINCUS, Mayer Brown LLP, of Washing-
`ton, DC, for amicus curiae BSA, et al. on rehearing en
`banc. With him on the brief was PAUL W. HUGHES.
`
`SUSAN M. DAVIES, Kirkland & Ellis LLP, of Wash-
`ington, DC, for amici curiae The Clearing House Asso-
`ciation L.L.C., et al. on rehearing en banc. With her on
`the brief was LIAM P. HARDY.
`
`PETER K. TRZYNA, Attorney at Law, of Chicago, Illi-
`nois, for amici curiae Professor Lee Hollaar, et al. on
`rehearing en banc.
`
`PETER J. BRANN, Brann & Isaacson, of Lewiston,
`Maine, for amici curiae Internet Retailers on rehearing en
`
`the brief were DAVID
`banc. With him on
`SWETNAM-BURLAND and STACY O. STITHAM.
`
`ROBERT P. GREENSPOON, Flachsbart & Greenspoon,
`LLC, of Chicago, Illinois, for amici curiae Telecommu-
`nication Systems, Inc., [*5] et al. on rehearing en banc.
`
`JERRY R. SELINGER, Patterson & Sheridan, LLP, of
`Dallas, Texas, for amicus curiae American Intellectual
`Property Law Association on rehearing en banc. With
`him on the brief was GERO MCCLELLAN. Of counsel
`on the brief was JEFFREY I.D. LEWIS, American Intel-
`lectual Property Law Association, of Arlington, Virginia.
`
`DAVID E. BOUNDY, Cantor Fitzgerald, L.P., of New
`York, New York, for amici curiae, BGC Partners, Inc., et
`al. on rehearing en banc. With him on the brief was
`GARY A. ROSEN, Law Offices of Gary A. Rosen, P.C.,
`of Ardmore, Pennsylvania.
`
`CHARLES K. VERHOEVEN, Quinn Emanuel Urquhart
`& Sullivan, of San Francisco, California, for amicus cu-
`riae Bancorp Services, LLC, on rehearing en banc. With
`him on the brief was DAVID A. PERLSON. Of counsel
`on the brief was IAN S. SHELTON, of Los Angeles,
`California.
`
`DALE R. COOK, ICT Law & Technology LLC, of Seat-
`tle, Washington, for amicus curiae Dale R. Cook on re-
`hearing en banc. With him on the brief was STEVEN F.
`BORSAND, Trading Technologies International, Inc., of
`Chicago, Illinois.
`
`ANN M. MCCRACKIN, of Minneapolis, Minnesota, for
`amicus curiae University of New Hampshire School of
`Law Intellectual Property Clinic on [*6] rehearing en
`banc. With her on the brief was J. JEFFREY HAWLEY,
`University of New Hampshire, of Concord, New Hamp-
`shire.
`
`JUDGES: Before RADER, Chief Judge, NEWMAN,
`LOURIE, LINN, DYK, PROST, MOORE, O'MALLEY,
`REYNA, and WALLACH, Circuit Judges.* Concurring
`opinion filed by LOURIE, Circuit Judge, in which DYK,
`PROST, REYNA, and WALLACH, Circuit Judges, join.
`Concurring-in-part and dissenting-in-part opinion filed
`by RADER, Chief Judge, LINN, MOORE, and
`O'MALLEY, Circuit Judges, as to all but part VI of that
`opinion. RADER, Chief Judge, and MOORE, Circuit
`Judge, as to part VI of that opinion. Dissenting-in-part
`opinion filed by MOORE, Circuit Judge, in which
`RADER, Chief Judge, and LINN and O'MALLEY, Cir-
`cuit Judges,
`join. Concurring-in-part and dissent-
`ing-in-part opinion filed by NEWMAN, Circuit Judge.
`Dissenting opinion filed by LINN and O'MALLEY,
`
`

`

`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 3
`
`Circuit Judges. Additional reflections filed by RADER,
`Chief Judge.
`
`
`* Circuit Judge Taranto did not participate in
`this decision.
`
`
`OPINION
`Opinion for the court filed PER CURIAM.
`PER CURIAM.
`Upon consideration en banc, a majority of the court
`affirms the district court's holding that the asserted
`method and computer-readable media claims are not
`directed to eligible [*7] subject matter under 35 U.S.C.
`§ 101. An equally divided court affirms the district
`court's holding that the asserted system claims are not
`directed to eligible subject matter under that statute.
`AFFIRMED
`
`
`CONCUR BY: LOURIE; NEWMAN (In Part)
`
`CONCUR
`LOURIE, Circuit Judge, concurring, with whom Cir-
`cuit Judges DYK, PROST, REYNA, and WALLACH join.
`Alice Corporation ("Alice") appeals from the grant
`of summary judgment in favor of declaratory judgment
`plaintiffs CLS Bank International and CLS Services, Ltd.
`(collectively, "CLS") by the United States District Court
`for the District of Columbia holding that certain claims
`of Alice's U.S. Patents 5,970,479 (the "'479 patent"),
`6,912,510 (the "'510 patent"), 7,149,720 (the "'720 pa-
`tent"), and 7,725,375 (the "'375 patent") are invalid un-
`der 35 U.S.C. § 101. CLS Bank Int'l v. Alice Corp., 768
`F. Supp. 2d 221 (D.D.C. 2011). On July 9, 2012, a panel
`of this court reversed, holding that the claims at issue,
`including claims drawn to methods, computer-readable
`media, and systems, were all patent eligible under § 101.
`CLS Bank Int'l v. Alice Corp., 685 F.3d 1341 (Fed. Cir.
`2012), vacated, 484 F. App'x 559 (Fed. Cir. 2012). CLS
`filed a petition for rehearing en banc, which [*8] was
`granted on October 9, 2012. CLS Bank Int'l v. Alice
`Corp., 484 F. App'x 559 (Fed. Cir. 2012).
`As described more fully below, we would affirm the
`district court's judgment in its entirety and hold that the
`method, computer-readable medium, and corresponding
`system claims before us recite patent-ineligible subject
`matter under 35 U.S.C. § 101.1
`
`
`1 While Chief Judge Rader is correct to note
`that no single opinion issued today commands a
`majority, seven of the ten members, a majority, of
`this en banc court have agreed that the method
`and computer-readable medium claims before us
`
`fail to recite patent-eligible subject matter. In ad-
`dition, eight judges, a majority, have concluded
`that the particular method, medium, and system
`claims at issue in this case should rise or fall to-
`gether in the § 101 analysis.
`
`
`BACKGROUND
`
`I. Alice's Patents
`Alice, an Australian company, owns the '479, '510,
`'720, and '375 patents by assignment. The patents, which
`all derive from the same family and share substantially
`the same specification, concern "the management of risk
`relating to specified, yet unknown, future events." '479
`patent col. 1, ll. 8-10. In particular, the patents relate to a
`computerized trading [*9] platform used for conducting
`financial transactions in which a third party settles obli-
`gations between a first and a second party so as to elimi-
`nate "counterparty" or "settlement" risk. CLS Bank, 768
`F. Supp. 2d at 224. Settlement risk refers to the risk to
`each party in an exchange that only one of the two par-
`ties will actually pay its obligation, leaving the paying
`party without its principal or the benefit of the counter-
`party's performance. Alice's patents address that risk by
`relying on a trusted third party to ensure the exchange of
`either both parties' obligations or neither obligation. Id.
`For example, when two parties agree to perform a
`trade, in certain contexts there may be a delay between
`the time that the parties enter a contractual agreement
`obligating themselves to the trade and the time of settle-
`ment when the agreed trade is actually executed. Ordi-
`narily, the parties would consummate the trade by paying
`or exchanging their mutual obligations after the inter-
`vening period, but in some cases one party might become
`unable to pay during that time and fail to notify the other
`before settlement. Id. As disclosed in Alice's patents, a
`trusted third party can be used to verify [*10] each par-
`ty's ability to perform before actually exchanging either
`of the parties' agreed-upon obligations. Id.; see also '479
`patent col. 5 ll. 61-63 ("The invention also encompasses
`apparatus and method dealing with the handling of con-
`tracts at maturity, and specifically the transfer of entitle-
`ment.").
`The claims currently before the court include claims
`33 and 34 of the '479 patent and all claims of the '510,
`'720, and '375 patents. The relevant claims of the '479
`and '510 patents recite methods of exchanging obliga-
`tions between parties, the claims of the '720 patent are
`drawn to data processing systems, and the claims of the
`'375 patents claim data processing systems as well as
`computer-readable media containing a program code for
`directing an exchange of obligations.
`
`II. District Court Proceedings
`
`

`

`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 4
`
`On May 24, 2007, CLS filed suit against Alice
`seeking a declaratory judgment of noninfringement, in-
`validity, and unenforceability as to the '479, '510, and
`'720 patents. Alice answered and counterclaimed, alleg-
`ing infringement. By the agreement of the parties, the
`district court allowed limited initial discovery, address-
`ing only the questions of (i) the operations of CLS, and
`(ii) CLS's [*11] relationship with the accused CLS sys-
`tem. CLS Bank Int'l v. Alice Corp., No. 07-cv-00974
`(D.D.C. Feb. 21, 2008), ECF No. 24 (Scheduling Order).
`In March 2009, following limited discovery, CLS
`moved for summary judgment on the bases that any pos-
`sible infringement could not be said to have occurred in
`the United States and that Alice's asserted claims were
`drawn to ineligible subject matter and therefore invalid
`under 35 U.S.C. § 101. Alice filed cross-motions on both
`issues. The district court denied CLS's motion as to ex-
`traterritoriality on October 13, 2009, finding that CLS's
`alleged infringing acts fell within the reach of domestic
`patent law. CLS Bank Int'l v. Alice Corp., 667 F. Supp.
`2d 29, 33-38 (D.D.C. 2009). Regarding subject-matter
`eligibility under § 101, the district court summarily de-
`nied the parties' motions on June 16, 2009, without prej-
`udice to refiling, after the Supreme Court granted certio-
`rari to review our decision in In re Bilski, 545 F.3d 943
`(Fed. Cir. 2008) (en banc), cert. granted sub. nom. Bilski
`v. Doll, 556 U.S. 1268, 129 S. Ct. 2735, 174 L. Ed. 2d
`246 (2009).
`In the meantime, the '375 patent issued, and Alice
`filed amended counterclaims additionally asserting that
`CLS infringed each claim [*12] of the '375 patent. Af-
`ter the Supreme Court issued its decision in Bilski v.
`Kappos, 130 S. Ct. 3218, 177 L. Ed. 2d 792 (2010), the
`parties renewed their cross-motions for summary judg-
`ment on the question of validity under § 101, with CLS
`adding invalidity contentions drawn to the newly issued
`'375 patent. Along with the parties' briefing, the district
`court also had before it (i) the asserted patents them-
`selves, (ii) excerpts from the patents' prosecution histo-
`ries, (iii) various guidelines issued by the United States
`Patent and Trademark Office ("PTO") regarding the ap-
`plication of § 101 during patent examination, and (iv) a
`declaration submitted by Alice's expert Paul Ginsberg. In
`particular, Mr. Ginsberg explained the operation of Al-
`ice's systems and methods, see generally CLS Bank, 768
`F. Supp. 2d at 224, and opined that a person of skill in
`the art reading the asserted patents would conclude that
`the claimed inventions must be implemented electroni-
`cally using "some type of computing processor and
`memory." Ginsberg Decl., ECF No. 95-3, Ex. 1 ¶ 41.
`The district court did not conduct claim construction
`before reaching the merits of the § 101 issue, but the
`parties agreed for purposes of deciding their [*13]
`summary judgment motions that Alice's claims should all
`
`be interpreted to require a computer including at least "a
`processor and memory." CLS Bank, 768 F. Supp. 2d at
`236; see id. at 235-36 ("The Court has yet to construe the
`terms of these claims . . . . [F]or purposes of these mo-
`tions, CLS has agreed to assume a construction of terms
`favorable to Alice."). With the parties' assent, the district
`court assumed that all of the asserted claims required
`electronic implementation, noting consistent disclosures
`in the patents' specifications as well as the statements of
`Alice's expert, Mr. Ginsberg. Id. at 236.
`With that understanding of the claims, the district
`court granted summary judgment in favor of CLS, hold-
`ing each of the asserted claims of Alice's patents invalid
`under § 101. The district court concluded that Alice's
`method claims "are directed to an abstract idea of em-
`ploying an intermediary to facilitate simultaneous ex-
`change of obligations in order to minimize risk." Id. at
`243. Further, the district court held the asserted system
`claims similarly ineligible, as those claims "would
`preempt the use of the abstract concept of employing a
`neutral intermediary to facilitate simultaneous [*14]
`exchange of obligations in order to minimize risk on any
`computer, which is, as a practical matter, how these pro-
`cesses are likely to be applied." Id. at 252. The asserted
`media claims failed on the same ground as "directed to
`the same abstract concept despite the fact they nominally
`recite a different category of invention." Id. at 255.
`Accordingly, the district court entered final judg-
`ment in favor of CLS, and Alice timely appealed. We
`have jurisdiction under 28 U.S.C. § 1295(a)(1).
`
`DISCUSSION
`
`I. Standard of Review
`We review the grant or denial of summary judgment
`applying the law of the relevant regional circuit. Teva
`Pharm. Indus. v. AstraZeneca Pharms. LP, 661 F.3d
`1378, 1381 (Fed. Cir. 2011). The D.C. Circuit considers
`a district court's grant of summary judgment without
`deference. Theodore Roosevelt Conservation P'ship v.
`Salazar, 661 F.3d 66, 72, 398 U.S. App. D.C. 199 (D.C.
`Cir. 2011). We apply our own law, however, with re-
`spect to issues of substantive patent law. Aero Prods.
`Int'l, Inc. v. Intex Recreation Corp., 466 F.3d 1000, 1016
`(Fed. Cir. 2006). Patent eligibility under § 101 presents
`an issue of law that we review de novo. Bancorp Servs.,
`LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266,
`1273 (Fed. Cir. 2012).
`
`II. [*15] Section 101
`
`A. Statutory Subject Matter and Common Law Excep-
`tions
`
`

`

`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 5
`
`"Whoever invents or discovers any new and useful
`process, machine, manufacture, or composition of mat-
`ter, or any new and useful improvement thereof, may
`obtain a patent therefor, subject to the conditions and
`requirements of this title." 35 U.S.C. § 101 (2006). Short
`and unadorned, § 101 appears deceptively simple on its
`face, yet its proper application to computer-implemented
`inventions and in various other fields of technology has
`long vexed this and other courts.
`The statute sets forth four broadly stated categories
`of patent-eligible subject matter: processes, machines,
`manufactures, and compositions of matter. As the Su-
`preme Court has explained, Congress intended that the
`statutory categories would be broad and inclusive to best
`serve the patent system's constitutional objective of en-
`couraging innovation. See Diamond v. Chakrabarty, 447
`U.S. 303, 308-09, 100 S. Ct. 2204, 65 L. Ed. 2d 144
`(1980) ("In choosing such expansive terms as 'manufac-
`ture' and 'composition of matter,' modified by the com-
`prehensive 'any,' Congress plainly contemplated that the
`patent laws would be given wide scope."); Bilski, 130 S.
`Ct. at 3225 ("Congress took this permissive approach
`[*16] to patent eligibility to ensure that 'ingenuity should
`receive a liberal encouragement.'" (quoting Chakrabarty,
`447 U.S. at 308)).
`It is also important to recognize that § 101, while
`far-reaching, only addresses patent eligibility, not overall
`patentability. The statute directs that an invention that
`falls within one of its four enumerated categories "may"
`qualify for a patent; thus, inventions that are patent eligi-
`ble are not necessarily patentable. As § 101 itself ex-
`plains, the ultimate question of patentability turns on
`whether, in addition to presenting a patent-eligible in-
`vention, the inventor also satisfies "the conditions and
`requirements of this title," namely, the novelty, nonob-
`viousness, and disclosure requirements of 35 U.S.C. §§
`102, 103, and 112, among others. See 35 U.S.C. § 101.
`Congress's broad approach to subject-matter eligibility
`ensures that the patent office doors remain open to most
`inventions, but even so, those that gain entry still must
`surmount various substantive and procedural hurdles that
`stand between patent eligibility and a valid patent. See
`Diamond v. Diehr, 450 U.S. 175, 191, 101 S. Ct. 1048,
`67 L. Ed. 2d 155 (1981).
`While the categories of patent-eligible subject matter
`recited in § 101 [*17] are broad, their scope is limited
`by three important judicially created exceptions. "[L]aws
`of nature, natural phenomena, and abstract ideas" are
`excluded from patent eligibility, id. at 185, because such
`fundamental discoveries represent "the basic tools of
`scientific and technological work," Gottschalk v. Benson,
`409 U.S. 63, 67, 93 S. Ct. 253, 34 L. Ed. 2d 273 (1972).
`Thus, even inventions that fit within one or more of the
`statutory categories are not patent eligible if drawn to a
`
`law of nature, a natural phenomenon, or an abstract idea.
`The underlying concern is that patents covering such
`elemental concepts would reach too far and claim too
`much, on balance obstructing rather than catalyzing in-
`novation. But danger also lies in applying the judicial
`exceptions too aggressively because "all inventions at
`some level embody, use, reflect, rest upon, or apply laws
`of nature, natural phenomena, or abstract ideas." Mayo
`Collaborative Servs. v. Prometheus Labs., Inc., 132 S.
`Ct. 1289, 1293, 182 L. Ed. 2d 321 (2012). Taken too far,
`the exceptions could swallow patent law entirely.
`Accordingly, the basic steps in a patent-eligibility
`analysis can be summarized as follows. We must first
`ask whether the claimed invention is a process, machine,
`[*18] manufacture, or composition of matter. If not, the
`claim is ineligible under § 101. If the invention falls
`within one of the statutory categories, we must then de-
`termine whether any of the three judicial exceptions
`nonetheless bars such a claim--is the claim drawn to a
`patentin-eligible law of nature, natural phenomenon, or
`abstract idea? If so, the claim is not patent eligible. Only
`claims that pass both inquiries satisfy § 101.
`While simple enough to state, the patent-eligibility
`test has proven quite difficult to apply. The difficulty lies
`in consistently and predictably differentiating between,
`on the one hand, claims that would tie up laws of nature,
`natural phenomena, or abstract ideas, and, on the other,
`claims that merely "embody, use, reflect, rest upon, or
`apply" those fundamental tools. Mayo, 132 S. Ct. at
`1293. For example, deciding whether or not a particular
`claim is abstract can feel subjective and unsystematic,
`and the debate often trends toward the metaphysical,
`littered with unhelpful analogies and generalizations.
`What is needed is a consistent, cohesive, and accessible
`approach to the § 101 analysis--a framework that will
`provide guidance and predictability for patent [*19]
`applicants and examiners, litigants, and the courts. As set
`forth below, the Supreme Court's foundational § 101
`jurisprudence offers the guideposts to such a system, one
`that turns primarily on the practical likelihood of a claim
`preempting a fundamental concept. We would adopt this
`approach to address the abstractness of the specific
`computer-implemented inventions presented in this case,
`but it might also inform patent-eligibility inquiries aris-
`ing in other contexts.
`
`B. Foundational Section 101 Precedents
`
`1. Gottschalk v. Benson
`In Benson, the Supreme Court considered claims to
`computer-implemented methods "for converting bina-
`ry-coded decimal (BCD) numerals into pure binary nu-
`merals." 409 U.S. at 64. The claims each recited a series
`of data manipulation steps for effecting the indicated
`
`

`

`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 6
`
`numerical conversion and "purported to cover any use of
`the claimed method in a general-purpose digital comput-
`er of any type." Id.
`Analyzing the claimed processes in view of its his-
`torical precedents, the Supreme Court concluded that the
`abstract ideas exception to patent eligibility applied. The
`Court identified the particular abstraction at issue as the
`freestanding "algorithm" or "generalized formulation"
`[*20] for performing BCD to pure binary conversion. Id.
`at 65. Next, the Court measured the scope of the claims
`against the scope of that overarching abstract idea. In
`practice, the claims were "so abstract and sweeping as to
`cover both known and unknown uses of the BCD to pure
`binary conversion" and would thus reach every applica-
`tion of the basic conversion algorithm, in contrast to ear-
`lier cases concerning patent-eligible process claims that
`had been cabined to discrete applications "sufficiently
`definite to confine the patent monopoly within rather
`definite bounds." Id. at 68-69. Furthermore, even though
`the claims required a computer,2 the Court did not view
`that as a meaningful limitation: "The mathematical for-
`mula involved here has no substantial practical applica-
`tion except in connection with a digital computer, which
`means that if the judgment below is affirmed, the patent
`would wholly pre-empt the mathematical formula and in
`practical effect would be a patent on the algorithm it-
`self." Id. at 71-72. Accordingly, the claims were held
`ineligible for patenting under § 101.
`
`
`2 Claim 8 required a computer on its face, but
`the literal terms of claim 13 were not so limited.
`See Benson, 409 U.S. at 73-74. [*21] The
`CCPA, however, had interpreted both claims as
`requiring a computer and had upheld them on that
`basis, see In re Benson, 441 F.2d 682, 687-88, 58
`C.C.P.A. 1134 (CCPA 1971), and the Supreme
`Court appeared to adopt that assumption.
`
`
`2. Parker v. Flook
`Six years later, in Parker v. Flook, 437 U.S. 584, 98
`S. Ct. 2522, 57 L. Ed. 2d 451 (1978), the Supreme Court
`again considered the patent eligibility of a computerized
`process--in particular, a method for updating alarm limits
`for continuously monitored industrial process variables
`(e.g., temperature or pressure) according to a disclosed
`mathematical formula. See id. at 585-86. The claim re-
`quired three steps: measuring the present value of a pro-
`cess variable, using the mathematical formula to calcu-
`late a new alarm limit in view of the present value, and
`adjusting the previous alarm limit to the newly calculated
`limit. Id.; see also id. at 596-97 (claim 1). A further
`preamble limitation restricted the claim to processes
`"comprising the catalytic chemical conversion of hydro-
`
`carbons," id. at 596, so the claim did not cover "every
`conceivable application of the formula," id. at 586.
`Although the claim would not "wholly preempt" the
`mathematical formula, id. at 589, the Court nonetheless
`held that [*22] the claimed process fell under the ab-
`stract ideas exception to patent eligibility. In its analysis,
`the Court viewed the formula as an abstract principle and
`stated that the case must "be considered as if the princi-
`ple or mathematical formula were well known." Id. at
`592. The Court then asked whether, to confer patent eli-
`gibility, the claim contained sufficient substance beyond
`the abstract mathematical formula itself--that is, "some
`other inventive concept in its application." Id. at 594; see
`also id. at 590 ("A competent draftsman could attach
`some form of post-solution activity to almost any math-
`ematical formula
`.
`.
`.
`."). Concluding
`that
`the
`field-of-use, monitoring, adjusting, and computer limita-
`tions were trivial or "well known" under such an analy-
`sis, the Court held that the claims were not patent eligi-
`ble: "[I]f a claim is directed essentially to a method of
`calculating, using a mathematical formula, even if the
`solution is for a specific purpose, the claimed method is
`nonstatutory." Id. at 594-95 (quoting In re Richman, 563
`F.2d 1026, 1030 (CCPA 1977)).
`
`3. Diamond v. Diehr
`The claims at issue in Diehr were drawn to process-
`es for curing synthetic rubber that included "the use
`[*23] of a mathematical formula and a programmed dig-
`ital computer." 450 U.S. at 177. The claimed methods
`included steps for operating a rubber molding press that
`included constantly determining the temperature inside
`the mold, repetitively calculating the necessary cure time
`using a mathematical formula known as the Arrhenius
`equation, and opening the press whenever the elapsed
`cure time equaled the calculated necessary cure time. See
`id. at 179 n.5.
`The Supreme Court held the claims to be patent eli-
`gible, a conclusion that was "not altered by the fact that
`in several steps of the process a mathematical equation
`and a programmed digital computer are used." Id. at 185.
`In contrast to Benson and Flook, the claims in Diehr em-
`ployed a mathematical concept but did "not seek to
`preempt the use of that equation. Rather, they [sought]
`only to foreclose from others the use of that equation in
`conjunction with all of the other steps in their claimed
`process." Id. at 187. In particular, the Court distinguished
`Flook on the basis that the claim there provided no sub-
`stantive details regarding the method's actual perfor-
`mance--rather, "'[a]ll that [*24] it provides is a formula
`for computing an updated alarm limit.'" See id. at 186-87
`(quoting Flook, 437 U.S. at 586). In contrast, in Diehr,
`the claimed process incorporating the Arrhenius equation
`also called for steps including "constantly measuring the
`
`

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`2013 U.S. App. LEXIS 9493, *; 106 U.S.P.Q.2D (BNA) 1696
`
`Page 7
`
`actual temperature inside the mold," a step that was said
`to be new in the art. See id. at 178-79.
`The Court also explained that a claim "does not be-
`come nonstatutory simply because it uses a mathematical
`formula, computer program, or digital computer" be-
`cause "an application of a law of nature or mathematical
`formula to a known structure or process may well be
`deserving of patent protection." Id. at 187. Because the
`applicant claimed a specific application, rather than an
`abstract idea in isolation, the claims satisfied § 101.
`
`4. Bilski v. Kappos
`Bilski concerned claims to processes for participants
`in energy commodities markets to hedge against the risk
`of price changes in those commodities. The claims recit-
`ed the hedging strategy as a series of steps involving
`transactions between a commodity provider and com-
`modity consumers and between the commodity provider
`and other market participants "having a counter-risk po-
`sition" to the consumers [*25] in order to balance risk;
`other claims articulated the hedging strategy as "a simple
`mathematical formula." 130 S. Ct. at 3223-24. The
`claims did not require a computer.
`Applying Benson, Flook, and Diehr, the Supreme
`Court held that the claims failed to recite a pa-
`tent-eligible process because they covered the abstract
`idea of hedging against risk. "Allowing [the claims]
`would pre-empt use of this approach in all fields, and
`would effectively grant a monopoly over an abstract
`idea." Id. at 3231. In addition, the Court reiterated
`Flook's admonition that such claims cannot be made pa-
`tent eligible by "limiting an abstract idea to one field of
`use or adding token post-solution components." Id. The
`Court therefore affirmed the rejection of the claims at
`issue under § 101.
`
`5. Mayo v. Prometheus
`The Supreme Court's most recent guidance regard-
`ing patent eligibility drew heavily on the foregoing
`precedents in applying the "laws of nature" exception to
`claims covering medical diagnostic methods. The claims
`in Mayo recited methods for optimizing thiopurine ad-
`ministration in a patient based on a natural correlation
`between the therapeutic efficacy of a particular dose of a
`thiopurine and the resulting [*26] concentration of thi-
`opurine metabolites in the patient's blood. Too little me-
`tabolite and the dose was insufficient; too much sug-
`gested that the dose should be reduced to avoid toxicity.
`Mayo, 132 S. Ct. at 1294-95. Accordingly, the claims
`recited the specific st