Rader’s Olive Branch: Ultramercial II Resolves The Judicial Deadlock Of CLS Bank

The Federal Circuit's en banc decision in CLS Bank Int'l v. Alice Corp., 717 F.3d 1269, (Fed. Cir. 2013) has been roundly criticized as a "nightmare," further cementing the impression that the court was confused and in conflict over the requirements of patent eligibility under 35 U.S.C. § 101. The six non-precedential opinions are seen as leaving patent applicants and owners alike without guidance, let alone predictability, as to whether their patents are valid.

Alice Corp.'s patents covered computer-implemented methods and systems for a third-party intermediary to ensure real-time settlement of currency exchange transactions between counterparties. Judges Lourie, Dyk, Wallach, Reyna, and Prost appeared to take a hard stand against such software-based financial inventions, finding that neither the method nor system claims were patent-eligible. Under Lourie's "integrated approach," the patent claims lacked any "meaningful limitations" and thereby preempted all "practical applications" of the abstract idea of third-party settlement. Taking a middle position, Judges Rader, Moore, Linn, and O'Malley agreed that the method claims were not patent-eligible, but argued that the system claims were patent-eligible because they contained limitations that were not necessary and inherent in the abstract idea. At the other end of the bench, Judges Linn and O'Malley argued that the method claims were indeed patent-eligible because they included limitations that prevented the claims from being "unduly preemptive."

Not long after CLS issued, the Federal Circuit issued its second opinion on patent eligibility in the case of Ultramercial v. Hulu, No. 2010-1544, 2013 U.S. App. LEXIS 12715 (Fed. Cir. June 21, 2013) (Ultramercial II). The Ultramercial patent had been before the Federal Circuit back in 2011,Ultramercial, LLC v. Hulu, LLC, 657 F.3rd 1323 (Fed. Cir. 2011) (Ultramercial I). Then, Rader, Lourie, and O'Malley agreed that the method claims were patent-eligible—but they had no guiding theory, just a bundle of notions regarding the expansive scope of § 101, its role as a "coarse eligibility filter," and an "I-know-it-when-I see-it" test that the abstractness of the claim "should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter". Id at *1327. There was no discussion of preemption or meaningful limitations, or whether limitations were inherent or necessary. After its decision in Mayo v. Prometheus, 132 S.Ct. 1289 (2012), the Supreme Court vacated the panel's decision and remanded.

One way to resolve an argumentative deadlock is for one party to show that its own approach is consistent with that of its putative...