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How Prometheus Has Upended Patent Eligibility An Anatomy of CLS Bank v. Alice Corp. 717 F.3d 1269 (Fed. Cir. 2013)(en banc) Bruce D. Sunstein Sunstein.

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Presentation on theme: "How Prometheus Has Upended Patent Eligibility An Anatomy of CLS Bank v. Alice Corp. 717 F.3d 1269 (Fed. Cir. 2013)(en banc) Bruce D. Sunstein Sunstein."— Presentation transcript:

1 How Prometheus Has Upended Patent Eligibility An Anatomy of CLS Bank v. Alice Corp. 717 F.3d 1269 (Fed. Cir. 2013)(en banc) Bruce D. Sunstein Sunstein Kann Murphy & Timbers LLP Boston ©2013 Sunstein Kann Murphy & Timbers LLP

2 2 The Patent Claims: ‘479 Method (No recitation of “computer”) 33. A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of: (a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions; (b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record; (c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and (d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

3 3 The Patent Claims: ‘375 Medium 39. A computer program product comprising a computer readable storage medium having computer readable program code embodied in the medium for use by a party to exchange an obligation between a first party and a second party, the computer program product comprising: program code for causing a computer to send a transaction from said first party relating to an exchange obligation *1288 arising from a currency exchange transaction between said first party and said second party; and program code for causing a computer to allow viewing of information relating to processing, by a supervisory institution, of said exchange obligation, wherein said processing includes (1) maintaining information about a first account for the first party, independent from a second account maintained by a first exchange institution, and information about a third account for the second party, independent from a fourth account maintained by a second exchange institution; (2) electronically adjusting said first account and said third account, in order to effect an exchange obligation arising from said transaction between said first party and said second party, after ensuring that said first party and/or said second party have adequate value in said first account and/or said third account, respectively; and (3) generating an instruction to said first exchange institution and/or said second exchange institution to adjust said second account and/or said fourth account in accordance with the adjustment of said first account and/or said third account, wherein said instruction being an irrevocable, time invariant obligation placed on said first exchange institution and/or said second exchange institution.

4 4 The Patent Claims: ‘720 System 1. A data processing system to enable the exchange of an obligation between parties, the system comprising: a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said transaction, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

5 5 The Vote: 5 votes: Judge Lourie (with Dyk, Prost, Reyna, and Wallach)—The method claims are too abstract to be patent eligible, the storage claims are disguised method claims, and the system claims are merely carrying out abstract method claims. Nothing is patent eligible. Gottschalk v. Benson followed.

6 6 The Vote: 4 votes: Judge Rader (with Linn, Moore, and O’Malley) and Moore (with Rader, Linn, and O’Malley)—The system claims are patent eligible because the computer performs a specific method as in Diehr. 2 votes: Judge Rader (with Moore): the method claims are patent ineligible because too abstract and not in a computer

7 7 The Vote: 2 votes: Judges Linn and O’Malley—The method claims are also patent eligible because they correspond to the system claims and are performed in a computer 1 vote: Judge Newman—All claims are patent eligible because within the statutory classes (brilliant opinion worth studying)

8 8 Summary of the score 7 votes (Lourie, Dyk, Prost, Reyna, Wallach, Rader, Moore): Method claims are not patent eligible. 5 votes (Lourie, Dyk, Prost, Reyna, Wallach): System claims are not patent eligible. 5 votes (Rader, Linn, Moore, O’Malley, and Newman): System claims are patent eligible. 3 votes (Linn, O’Malley, and Newman): Method claims are patent eligible.

9 9 Summary of the score 7 votes (Lourie, Dyk, Prost, Reyna, Wallach, Rader, Moore): Method claims are not patent eligible. 5 votes (Lourie, Dyk, Prost, Reyna, Wallach): System claims are not patent eligible. 5 votes (Rader, Linn, Moore, O’Malley, and Newman): System claims are patent eligible. 3 votes (Linn, O’Malley, and Newman): Method claims are patent eligible. new ground

10 10 The new ground 5 votes (Lourie, Dyk, Prost, Reyna, Wallach): System claims are not patent eligible. “Does the claim, in practical effect, place an abstract idea at risk of preemption? And, if so, do the limitations of the claim, including any computer-based limitations, add “enough” beyond the abstract idea itself to limit the claim to a narrower, patent-eligible application of that idea?”

11 11 The new ground (cont’d) “The computer-based limitations recited in the system claims here cannot support any meaningful distinction from the computer- based limitations that failed to supply an ‘inventive concept’ to the related method claims.” “[T]he system claims recite 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 the method claims.

12 12 The authority for the new ground “[S]ee Mayo, 132 S.Ct. at 1301 (‘[The Court in Benson] held that simply implementing a mathematical principle on a physical machine, namely a computer, was not a patentable application of that principle.’).” “For all practical purposes, every general- purpose computer will include “a computer,” “a data storage unit,” and “a communications controller” that would be capable of performing the same generalized functions required of the claimed systems to carry out the otherwise abstract methods recited therein.”

13 13 The authority explained “Therefore, as with the asserted method claims, such limitations are not actually limiting in the sense required under §101; they provide no significant ‘inventive concept.’” “The system claims are instead akin to stating the abstract idea of third party intermediation and adding the words: ‘apply it’ on a computer. See Mayo, 132 S.Ct. at 1294.”

14 14 Five judges in CLS Bank v. Alice Corp. Would use Prometheus and Benson to deny patent eligibility to a system claim that recites computer components without reciting an “inventive concept”

15 15 The roots of CLS Bank v. Alice Corp.: Gottschalk v. Benson, 409 U.S. 63 (1972), claim 8 The method of converting signals from binary coded decimal form into binary which comprises the steps of (1) storing the binary coded decimal signals in a reentrant shift register, (2) shifting the signals to the right by at least three places, until there is a binary ‘1’ in the second position of said register, (3) masking out said binary ‘1’ in said second position of said register, (4) adding a binary ‘1’ to the first position of said register, (5) shifting the signals to the left by two positions, (6) adding a ‘1’ to said first position, and (7) shifting the signals to the right by at least three positions in preparation for a succeeding binary ‘1’ in the second position of said register.

16 16 Benson holding, per Justice Douglas: “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.” 409 U.S. 63.

17 17 Diamond v. Diehr, 450 U.S. 175 (1981) Claims directed to a method of molding rubber with the aid of digital computer, including “repetitively calculating in the computer, at frequent intervals during each cure, the Arrhenius equation for reaction time during the cure … and opening the press automatically when a said comparison indicates equivalence.” Held, patent eligibility “is not altered by the fact that in several steps of the process a mathematical equation and a programmed digital computer are used.”

18 18 The roots of CLS Bank v. Alice Corp.: Mayo v. Prometheus, 132 S. Ct (2012) The Claims administering a thiopurine drug to a subject with a gastrointestinal disorder, determining the level of a specific metabolite in the subject, wherein a level below a first threshold indicates a need to increase drug dosage and wherein a level above a second threshold indicates a need to decrease drug dosage.

19 19 The roots of CLS Bank v. Alice Corp.: Mayo v. Prometheus, 132 S. Ct (2012) The Holding “the ‘administering’ step simply refers to the relevant audience, namely doctors who treat patients with certain diseases with thiopurine drugs” “the ‘wherein’ clauses simply tell a doctor about the relevant natural laws” and the determining step “tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists who work in the field”.

20 20 The Prometheus effect Diehr distinguished as having other steps that “apparently added to the formula something that in terms of patent law's objectives had significance—they transformed the process into an inventive application of the formula.” Benson approved because “the claim (like the claims before us) was overly broad; it did not differ significantly from a claim that just said ‘apply the algorithm.’” This thinking drives the Lourie faction in CLS Bank v. Alice Corp.

21 21 Ultramercial v. Hulu, 722 F.3d 1335 (Fed. Cir. 6/21/13) shows the Fed. Cir. split. 1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of: a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data; a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message; … offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message etc.

22 22 Ultramercial v. Hulu, opinion by Raider (with O’Malley) The claimed invention is a method for monetizing and distributing copyrighted products over the Internet. As a method, it easily satisfies § 100's definition of “process” and thus falls within a § 101 category of patent-eligible subject matter. Thus, this court focuses on whether the claim is meaningfully limited to something less than an abstract idea that pre-empts use of an abstract concept. “[T]he '545 patent claims a particular internet and computer-based method for monetizing copyrighted products” using the specific steps recited in the claims. “[I]t is clear that several steps plainly require that the method be performed through computers, on the internet, and in a cyber-market environment.”

23 23 Ultramercial v. Hulu, Raider opinion (cont’d) “In other words, a programmed computer contains circuitry unique to that computer. That ‘new machine’ could be claimed in terms of a complex array of hardware circuits, or more efficiently, in terms of the programming that facilitates a unique function.” This court understands that the broadly claimed method in the '545 patent does not specify a particular mechanism for delivering media content to the consumer (i.e., FTP downloads, , or real-time streaming). This breadth and lack of specificity does not render the claimed subject matter impermissibly abstract. Assuming the patent provides sufficient disclosure to enable a person of ordinary skill in the art to practice the invention and to satisfy the written description requirement, the disclosure need not detail the particular instrumentalities for each step in the process. “[A]s a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not ‘so manifestly abstract as to override the statutory language of section 101.’”

24 24 Ultramercial v. Hulu, Lourie concuring opinion “The plurality opinion in CLS Bank identified a two-step process, derived from Mayo, for analyzing patent eligibility under § 101. First, a court must identify ‘whether the claimed invention fits within one of the four statutory classes set out in § 101.’ … Second, one must assess whether any of the judicial exceptions to subject-matter eligibility apply, including whether the claims are to patent-ineligible abstract ideas.” “In the case of abstractness, as discussed in CLS Bank, we must determine whether the claim poses ‘any risk of preempting an abstract idea.’ … To do so we must first ‘identify and define whatever fundamental concept appears wrapped up in the claim’; a claim construction may be helpful in this analysis. … Then, proceeding with the preemption analysis, the balance of the claim is evaluated 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 “limitations in these claims represent significantly more than the underlying abstract idea of using advertising as an exchange or currency and, as a consequence, do not preempt the use of that idea in all fields.”

25 25 Accenture v. Guidewire, No (Fed. Cir. 9/5/13). Claim 1: A system for generating tasks to be performed in an insurance organization, the system comprising: an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format; a task library database for storing rules for determining tasks to be completed upon an occurrence of an event; a client component … a server component … the server component including an event processor … wherein the event processor ….

26 26 Accenture v. Guidewire, Opinion by Lourie (with Reyna) “We conclude that the district court’s decision on patent-ineligibility of the system claims must also be affirmed, both because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible and because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster.”

27 27 Accenture v. Guidewire, dissenting opinion by Rader “[A]ny claim can be stripped down, simplified, generalized, or paraphrased to remove all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed. A court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims.” Ultramercial, Inc. v. Hulu, LLC, , 2013 WL , at *8 (Fed. Cir. June 21, 2013). In my judgment, the court has done precisely that. Therefore, I respectfully dissent.”

28 28 Judge Moore in CLS Bank v. Alice Corp. “I am concerned that the current interpretation of § 101, and in particular the abstract idea exception, is causing a free fall in the patent system. … See Bilski, Prometheus, Myriad (under consideration). … Holding that all of these claims are directed to no more than an abstract idea gives staggering breadth to what is meant to be a narrow judicial exception.”

29 29 Judge Moore (cont’d) “[I]f all of these claims, including the system claims, are not patent- eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunica- tions patents.”

30 30 Conclusion Uncertainty of the law relating to patent eligibility, introduced by Mayo v. Prometheus, and now manifested in cases like CLS Bank v. Alice Corp., desperately needs to be repaired. If repaired by a court, it will be the very court that unanimously delivered Mayo v. Prometheus. A one sentence legislative amendment would solve these problems: Section 101 of Title 35 of the United States Code shall be amended by adding the following sentence at the end thereof: An invention that produces a useful, concrete, and tangible result shall not be denied eligibility for a patent on the ground that it is directed to a law of nature, natural phenomenon, or abstract idea.

31 Thank you.


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