Federal Circuit Attempts To Make 'Abstract Ideas' Less Abstract

Originally published in V&E IP Insights E-communication, July 10, 2012

On July 9, 2012, the Federal Circuit issued a split panel decision in CLS Bank Int'l v. Alice Corp., in which the majority attempted to make 35 U.S.C. Section 101's prohibition on patenting "abstract ideas" more concrete. The court below granted summary judgment that the four patents-in-suit were invalid as claiming unpatentable subject matter. The four patents, which included method claims, system claims, and media claims, covered a computerized trading platform for exchanging obligations in which a third party settled obligations between a first and second party so as to eliminate the "settlement risk" that one side would not meet its obligation. The majority reversed the district court's holding that the patents claimed ineligible abstract ideas. Instead, the majority held that a claim should be held inadequate under section 101 as an abstract idea only when, after considering all of the claim's limitations, it is "manifestly evident" that the claim is directed to a patent-ineligible abstract idea. Here, "[t]he asserted claims appear to cover the practical application of a business concept in a specific way" and left room for other methods of using intermediaries to consummate exchanges. The majority also emphasized that this issue need not always be addressed before other validity challenges, especially if other validity challenges may resolve the dispute more expeditiously or with more clarity and predictability.

Judge Prost's dissent criticized the majority as not having applied the patentable subject matter test with the vigor required by Bilski and Prometheus and instead creating an...