CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`KeyCite Yellow Flag - Negative Treatment
`Distinguished by
`TQP Development, LLC v. Intuit Inc.,
`February 19, 2014
`
`E.D.Tex.,
`
`
`
`717 F.3d 1269
`United States Court of Appeals,
`Federal Circuit.
`
`CLS BANK INTERNATIONAL, Plaintiff–Appellee,
`and
`CLS Services Ltd., Counterclaim
`Defendant–Appellee,
`v.
`ALICE CORPORATION PTY.
`LTD., Defendant–Appellant.
`
`No. 2011–1301.
`
` | May 10, 2013.
`
`Synopsis
`Background: In suit concerning infringement and validity
`of patents generally directed to methods or systems that
`help lessen settlement risk of trades of financial instruments
`using a computer system, the United States District Court
`for the District of Columbia, Rosemary M. Collyer, J.,
`768 F.Supp.2d 221, granted plaintiffs' motion for summary
`judgment, and defendants appealed.
`
`Holdings: Upon consideration en banc, a majority of the
`Court of Appeals held that:
`
`[1] the asserted method and computer-readable media claims
`were not directed to eligible subject matter under patent
`eligibility statute, and an equally divided court affirmed the
`district court's holding that
`
`[2] the asserted system claims were not directed to eligible
`subject matter under patent eligibility statute.
`
`Affirmed.
`
`Lourie, Circuit Judge, concurring, in which Dyk, Prost,
`Reyna, and Wallach, Circuit Judges, joined.
`
`Moore, Circuit Judge, filed opinion dissenting-in-part in
`which Rader, Chief Judge, and Linn and O'Malley, Circuit
`Judges, joined.
`
`Newman, Circuit Judge, filed opinion concurring in part, and
`dissenting in part.
`
`Linn and O'Malley, Circuit Judges, filed opinion dissenting
`from the court's judgment.
`
`West Headnotes (12)
`
`[1]
`
`Patents
`Eligible Subject Matter
`
`Inventions that are patent eligible are not
`necessarily patentable. (Per equally divided
`court.) 35 U.S.C.A. § 101.
`
`Cases that cite this headnote
`
`[2]
`
`Patents
`Claims and Limitations; Language of
`Patent
`
`Limitations that represent a human contribution
`but are merely
`tangential,
`routine, well-
`understood, or conventional, or in practice fail to
`narrow patent claim relative to the fundamental
`principle therein, cannot confer patent eligibility.
`(Per equally divided court.) 35 U.S.C.A. § 101.
`
`2 Cases that cite this headnote
`
`[3]
`
`Patents
`Claims and Limitations; Language of
`Patent
`
`Bare field-of-use limitations cannot rescue a
`claim from patent ineligibility where claim as
`written still effectively preempts all uses of a
`fundamental concept within the stated field. (Per
`equally divided court.)
`
`Cases that cite this headnote
`
`Rader, Chief Judge, Linn, Moore, and O'Malley, Circuit
`Judges, filed opinion concurring-in-part and dissenting-in-
`part.
`
`[4]
`
`Patents
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`1
`
`1
`
`SAMSUNG 1045
`Samsung Electronics v. SmartFlash
`CBM2014-00192
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`Laws of nature, natural phenomena, and
`abstract ideas; fundamental principles
`
`Analyzing patent eligibility considers whether
`steps combined with a natural law or abstract
`idea are so insignificant, conventional, or routine
`as to yield a claim that effectively covers the
`natural law or abstract idea itself. (Per equally
`divided court.) 35 U.S.C.A. § 101.
`
`19 Cases that cite this headnote
`
`[5]
`
`Patents
`Eligible Subject Matter
`
`District courts may exercise their discretion to
`begin analysis of patent dispute elsewhere than
`patent eligibility statute when they perceive that
`another section of the Patent Act might provide a
`clearer and more expeditious path to resolving a
`dispute.(Per equally divided court.) 35 U.S.C.A.
`§ 101.
`
`Cases that cite this headnote
`
`[6]
`
`Patents
`Presumption of correctness in general
`Patents
`Obviousness; lack of invention
`
`All issued patent claims receive a statutory
`presumption of validity,
`and,
`as with
`obviousness and enablement, that presumption
`applies when patent ineligibility is raised as a
`basis for invalidity in district court proceedings.
`(Per equally divided court.) 35 U.S.C.A. § 101.
`
`8 Cases that cite this headnote
`
`[7]
`
`Patents
`Business methods
`
`Asserted method claims of patent useful for
`conducting financial transactions using a third
`party to settle obligations between a first and
`second party so as to mitigate “settlement risk”
`were not directed to eligible subject matter
`under patent eligibility statute; requirement for
`computer participation in those claims failed to
`supply an “inventive concept” that represented a
`nontrivial, nonconventional human contribution
`or materially narrowed the claims relative to
`
`the abstract idea they embraced, and there
`was nothing in the asserted method claims
`that represented “significantly more” than the
`underlying abstract idea for purposes of patent
`eligibility. 35 U.S.C.A. § 101.
`
`34 Cases that cite this headnote
`
`[8]
`
`Patents
`Computers and Software
`
`computer
`generic
`appending
`Simply
`functionality to lend speed or efficiency to the
`performance of an otherwise abstract concept
`does not meaningfully limit claim scope for
`purposes of patent eligibility. (Per equally
`divided court.) 35 U.S.C.A. § 101.
`
`11 Cases that cite this headnote
`
`[9]
`
`Patents
`Computers and Software
`
`Unless the claims require a computer to perform
`operations that are not merely accelerated
`calculations, a computer does not itself confer
`patent eligibility. (Per equally divided court.) 35
`U.S.C.A. § 101.
`
`1 Cases that cite this headnote
`
`[10]
`
`Patents
`Business methods; Internet applications
`
`Computer-readable media patent claims useful
`for conducting financial transactions using a
`third party to settle obligations between a first
`and second party so as to mitigate “settlement
`risk” were not directed to eligible subject
`matter under patent eligibility statute; “computer
`readable medium claims” were equivalent to
`the methods they recited for patent eligibility
`purposes, and were merely method claims in the
`guise of a device. 35 U.S.C.A. § 101.
`
`20 Cases that cite this headnote
`
`[11]
`
`Patents
`Data processing
`
`Patent claims reciting “data processing systems”
`configured to enable the exchange of mutual
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`2
`
`2
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`obligations through an intermediary were not
`directed
`to eligible subject matter under
`patent eligibility statute; instead of wholly
`implied computer limitations, system claims
`recited a handful of computer components in
`generic, functional terms that would encompass
`any device capable of performing the same
`ubiquitous calculation, storage, and connectivity
`functions required by asserted patent method
`claims, and the computer-based limitations
`recited in the system claims could not support
`any meaningful distinction from the computer-
`based limitations that failed to supply an
`“inventive concept” to the related method
`claims. (Per equally divided court.) 35 U.S.C.A.
`§ 101.
`
`14 Cases that cite this headnote
`
`[12]
`
`Patents
`In general; utility
`
`US Patent 5,970,479, US Patent 6,912,510, US
`Patent 7,149,720, US Patent 7,725,375. Invalid.
`
`Cases that cite this headnote
`
`Attorneys and Law Firms
`
`*1271 Mark A. Perry, Gibson, Dunn & Crutcher LLP,
`of Washington, DC, argued for plaintiff-appellee and
`counterclaim-defendant appellee on rehearing en banc. With
`him on the brief were Brian M. Buroker, Michael F. Murray
`and Alexander N. Harris. Of counsel on the brief was Michael
`A. Valek, of Dallas, TX.
`
`Adam L. Perlman, Williams & Connolly, LLP, of
`Washington, DC, argued
`for defendant-appellant on
`rehearing en banc. With him on the brief were Bruce R.
`Genderson, Ryan T. Scarborough, Stanley E. Fisher and
`David M. Krinsky. Of counsel on the brief were Constantine
`L. Trela, Jr., Sidley Austin, LLP, of Chicago, IL 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,
`VA, 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, and Thomas E. Krause, Special Counsel for IP
`Litigation. Of counsel on the brief were Beth S. Brinkmann,
`Deputy Assistant Attorney General, Scott R. McIntosh and
`Mark R. Freeman, Attorneys, Appellate Staff, Civil Division,
`United States Department of Justice, of Washington, DC.
`
`*1272 Stephen R. Stites, Bluemont, VA, as amicus curiae
`on rehearing en banc.
`
`Jack E. Haken, Philips Intellectual Property and Standards, of
`Briarcliff Manor, NY, 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 Houston, TX,
`for amicus curiae The Juhasz Law Firm, P.C., on rehearing
`en banc.
`
`Charles W. Shifley, Banner & Witcoff, Ltd., of Chicago, IL,
`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
`Beteiligungsgesellschaft mbH on rehearing en banc.
`
`Julie P. Samuels, Electronic Frontier Foundation, of
`San Francisco, CA, for amici curiae Electronic Frontier
`Foundation, et al. on rehearing en banc. With her on the brief
`was Michael Barclay.
`
`Charles R. Macedo, Amster, Rothstein & Ebenstein LLP,
`of New York, NY, for amicus curiae New York Intellectual
`Property Law Association on rehearing en banc. With him on
`the brief was Michael J. Kasdan. Of counsel on the brief was
`Anthony F. Lo Cicero, New York Intellectual Property Law
`Association, of Fort Lee, NJ.
`
`John D. Vandenberg, Klarquist Sparkman, LLP, of Portland,
`OR, for amicus curiae British Airways, PLC, et al. on
`rehearing en banc.
`
`Matthew Schruers, Computer & Communications Industry
`Association, (CCIA) for amicus curiae Computer &
`Communications Industry Association on rehearing en banc.
`
`Daryl Joseffer, King & Spalding LLP, of Washington, DC,
`for amici curiae Google Inc., et al. on rehearing en banc. With
`him on the brief was Adam Conrad, of Charlotte, NC.
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`3
`
`3
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`George L. Graff, of Briarcliff Manor, NY, for amicus curiae
`Intellectual Property Owners Association on rehearing en
`banc. With him on the brief were Richard F. Phillips,
`ExxonMobil Chemical Company, of Houston, TX and Kevin
`H. Rhodes, 3M Innovative Properties Company, of St. Paul,
`MN.
`
`Steven C. Sereboff, SoCal IP Law Group LLP, of
`Westlake Village, CA, 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, NY.
`
`Andrew J. Pincus, Mayer Brown LLP, of Washington, 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 Washington, DC,
`for amici curiae The Clearing House Association 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, IL, for amici
`curiae Professor Lee Hollaar, et al. on rehearing en banc.
`
`Peter J. Brann, Brann & Isaacson, of Lewiston, ME, for amici
`curiae Internet Retailers on rehearing en banc. With him on
`the brief were David Swetnamburland and Stacy O. Stitham.
`
`Robert P. Greenspoon, Flachsbart & Greenspoon, LLC, of
`Chicago, IL, for amici *1273 curiae Telecommunication
`Systems, Inc., et al. on rehearing en banc.
`
`Jerry R. Selinger, Patterson & Sheridan, LLP, of Dallas,
`TX, 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 Intellectual Property Law Association, of
`Arlington, VA.
`
`David E. Boundy, Cantor Fitzgerald, L.P., of New York, NY,
`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, PA.
`
`Charles K. Verhoeven, Quinn Emanuel Urquhart & Sullivan,
`of San Francisco, CA, for amicus curiae 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, CA.
`
`Dale R. Cook, ICT Law & Technology LLC, of Seattle,
`WA, for amicus curiae Dale R. Cook on rehearing en banc.
`With him on the brief was Steven F. Borsand, Trading
`Technologies International, Inc., of Chicago, IL.
`
`Ann M. McCrackin, of Minneapolis, MN, for amicus curiae
`University of New Hampshire School of Law Intellectual
`Property Clinic on rehearing en banc. With her on the brief
`was J. Jeffrey Hawley, University of New Hampshire, of
`Concord, NH.
`
`Before RADER, Chief Judge, NEWMAN, LOURIE, LINN,
`DYK, PROST, MOORE, O'MALLEY, REYNA, and
`WALLACH, Circuit Judges. *
`
`Opinion
`
`Opinion for the court filed PER CURIAM.
`
`Concurring opinion filed by LOURIE, Circuit Judge, in which
`DYK, PROST, REYNA, and WALLACH, Circuit Judges,
`join.
`
`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
`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
`
`LOURIE, Circuit Judge, concurring, with whom Circuit
`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
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`4
`
`4
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`5,970,479 (the “#479 patent”), 6,912,510 (the “#510 patent”),
`7,149,720 (the “#720 patent”), and 7,725,375 (the “#375
`patent”) are invalid under 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 Fed.Appx. 559 (Fed.Cir.2012). CLS filed a
`petition for rehearing en banc, which was granted on October
`9, 2012. CLS Bank Int'l v. Alice Corp., 484 Fed.Appx. 559
`(Fed.Cir.2012).
`
`*1274 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
`
`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 each party'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 contracts at maturity, and
`specifically the transfer of entitlement.”).
`
`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 obligations 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.
`
`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 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. 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 parties will actually pay its obligation, leaving the paying
`party without its principal or the benefit of the counterparty'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 settlement when the agreed trade is
`actually executed. Ordinarily, the parties would consummate
`the trade by paying or exchanging their mutual obligations
`after the intervening period, but in some cases one party
`
`II. District Court Proceedings
`
`On May 24, 2007, CLS filed suit against Alice seeking
`a declaratory judgment of noninfringement, invalidity, and
`unenforceability as to the ′479, ′510, and ′720 patents. Alice
`answered and counterclaimed, alleging infringement. By the
`agreement of the parties, the district court allowed limited
`initial discovery, addressing only the questions of (i) the
`operations of CLS, and (ii) CLS's relationship with the
`accused CLS system. CLS Bank Int'l v. Alice Corp., No. 07–
`cv–00974 (D.D.C. Feb. 21, 2008), ECF No. 24 (Scheduling
`Order).
`
`*1275 In March 2009, following limited discovery, CLS
`moved for summary judgment on the bases that any possible
`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 extraterritoriality
`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 denied the parties' motions on June 16, 2009,
`without prejudice to refiling, after the Supreme Court granted
`certiorari to review our decision in In re Bilski, 545 F.3d 943
`(Fed.Cir.2008) (en banc), cert. granted sub. nom. Bilski v.
`Doll, ––– U.S. ––––, 129 S.Ct. 2735, 174 L.Ed.2d 246 (2009).
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`5
`
`5
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`In the meantime, the ′375 patent issued, and Alice filed
`amended counterclaims additionally asserting that CLS
`infringed each claim of the ′ 375 patent. After the Supreme
`Court issued its decision in Bilski v. Kappos, ––– U.S.
`––––, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010), the parties
`renewed their crossmotions for summary judgment 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 themselves, (ii) excerpts from the
`patents' prosecution histories, (iii) various guidelines issued
`by the United States Patent and Trademark Office (“PTO”)
`regarding the application of § 101 during patent examination,
`and (iv) a declaration submitted by Alice's expert Paul
`Ginsberg. In particular, Mr. Ginsberg explained the operation
`of Alice'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 electronically 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 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 motions, 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, holding 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 employing an intermediary to
`facilitate simultaneous exchange 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 exchange of
`obligations in order to minimize risk on any computer, which
`is, as a practical matter, how these processes 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 *1276 recite a different category of
`invention.” Id. at 255.
`
`Accordingly, the district court entered final judgment 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 Pharm. 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 (D.C.Cir.2011). We apply our own law, however, with
`respect 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. Section 101
`
`A. Statutory Subject Matter
`and Common Law Exceptions
`
`“Whoever invents or discovers any new and useful process,
`machine, manufacture, or composition of matter, 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 Supreme Court has
`explained, Congress intended that the statutory categories
`would be broad and inclusive to best serve the patent system's
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`6
`
`6
`
`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`constitutional objective of encouraging 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 ‘manufacture’ and ‘composition of matter,’ modified
`by the comprehensive ‘any,’ Congress plainly contemplated
`that the patent laws would be given wide scope.”); Bilski, 130
`S.Ct. at 3225 (“Congress took this permissive approach to
`patent eligibility to ensure that ‘ingenuity should receive a
`liberal encouragement.’ ” (quoting Chakrabarty, 447 U.S. at
`308, 100 S.Ct. 2204)).
`
`[1]
` 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 eligible
`are not necessarily patentable. As § 101 itself explains,
`the ultimate question of patentability turns on whether,
`in addition to presenting a patent-eligible invention, the
`inventor also satisfies “the conditions and requirements of this
`title,” namely, the novelty, nonobviousness, 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 are broad, *1277 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, 101 S.Ct. 1048, 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 innovation. 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., ––– U.S. ––––, 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, 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 determine whether any of the three
`judicial exceptions nonetheless bars such a claim—is the
`claim drawn to a patent-ineligible 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 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 arising 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 binary-coded decimal
`(BCD) numerals into pure binary numerals.” 409 U.S. at
`64, 93 S.Ct. 253. The claims each recited a series of data
`manipulation steps for effecting the indicated numerical
`conversion and “purported to cover any use of the claimed
`method in a general-purpose digital computer of any type.” Id.
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`7
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`7
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`

`
`CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (2013)
`106 U.S.P.Q.2d 1696
`
`Analyzing the claimed processes in view of its historical
`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 *1278 “generalized
`formulation” for performing BCD to pure binary conversion.
`Id. at 65, 93 S.Ct. 253. 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
`application of the basic conversion algorithm, in contrast
`to earlier 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, 93 S.Ct. 253. Furthermore, even
`though the claims required a computer, 2 the Court did not
`view that as a meaningful limitation: “The mathematical
`formula involved here has no substantial practical application
`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 itself.” Id. at 71–72,
`93 S.Ct. 253. Accordingly, the claims were held ineligible for
`patenting under § 101.
`
`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, 98 S.Ct. 2522.
`The claim required three steps: measuring the present value
`of a process variable, using the mathematical formula to
`calculate 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, 98 S.Ct. 2522 (claim
`1). A further preamble limitation restricted the claim to
`processes “comprising the catalytic chemical conversion of
`hydrocarbons,” id. at 596, 98 S.Ct. 2522, so the claim did not
`cover “every conceivable application of the formula,” id. at
`586, 98 S.Ct. 2522.
`
`Although the claim would not “wholly preempt” the
`mathematical formula, id. at 589, 98 S.Ct. 2522, the Court
`nonetheless held that the claimed process fell under the
`abstract 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 principle
`or mathematical formula were well known.” Id. at 592, 98
`S.Ct. 2522. The Court then asked whether, to confer patent
`eligibility, the claim contained sufficient substance beyond
`the abstract mathematical formula itself—that is, “some other
`inventive concept in its application.” Id. at 594, 98 S.Ct. 2522;
`see also id. at 590, 98 S.Ct. 2522 (“A competent draftsman
`could attach some form of post-solution activity to a