Alice Corp. v. CLS Bank: Setting the abstract idea goalposts

This week, the Court heard oral arguments in Alice Corp. v. CLS Bank. There are lots of writeups, and I, of course, prefer the one that quotes me. For that reason, I’m going to skip a lot of the detail. The gist of the case is that the Supreme Court must again decide whether patent claims are eligible subject matter – that is, whether the claims should be tested on their merits, or thrown out because we just don’t patent that sort of thing.

The last time around, in Bilski v. Kappos, the Court said that abstract ideas were not patentable, and that a claim to hedging was an abstract idea. That’s all well and good, until the next claim comes around, and the next claim, and the next claim. In Mayo v. Prometheus, the court added a little meat to the bones, saying that once you have your “natural law,” the inventor has to add some non-conventional steps in addition to the natural law.

That’s all well and good, except: 1) for reasons I can’t understand, lower courts aren’t tying the Prometheus conventional steps idea to abstract ideas systematically; 2) the conventional steps view imports 102 and 103, but without any of the rigor those sections require; and 3) lower courts and litigants can’t agree on what the base “idea” or “law” is, to which we might add steps. More on that later. Justice Breyer, at oral arguments in Alice, made clear that the Court was providing a “shell” in prior cases and that he was hopeful that the lower courts and litigants would figure it out.

How wrong he was. As I’ve written several times over the past seven years, since before subject matter challenges were en vogue, this is a morass that cannot be solved in a principled way. I think the best shot we had was our argument in Life after Bilski that we should be looking for claim overbreadth, and for ideas untethered from any application. The Court did not adopt this approach, though there is hope it will reconsider in this case.

But, despite my misgivings, my viewpoint that we should just abandon all attempts to limit patentable subject matter beyond the statute has been expressly rejected by the Court. In short, the Court really, really wants 101 to do something, and it is now struggling with what and how.

This leads to my view of how the Court should rule. Despite everyone who knows anything about patents (including me) thinking the Court is going to invalidate some of the claims of this patent, my view is that the Court must affirm patentability of the Alice Corp. claims. This doesn’t mean I think it’s a good patent.

Why do I argue this? Because we need goalposts. As long as the Court continues to hold patents invalid, we will see uncertainty. This is directly parallel to the Diehr case of 1981. Prior to that time, there was great uncertainty about what could be patented, and it did not end until Diehr. That uncertainty led to under-applications for patents, which led to less prior art, which made it harder to invalidate weak patents of the 1990s, the very same patents that give us so much trouble now.

My view is that Alice Corp. can be a new floor, that patent applications can be rejected on their merits but also become part of the public domain to wipe out other patent applications on weak inventions of the future. We need goalposts.

As for the actual subject matter of the patent, saying it is not an abstract idea is not a stretch. The broadest claim at issue is a system configured for settling multiparty transactions on a computer, getting information from a “device” and “generating instructions.” It’s written fancily, but it’s a pretty simple claim. Public Knowledge claims it can be implemented in 7 lines of Basic code. This is a bit of an exaggeration that takes some liberties with claim construction.

But that’s the point. First, we should probably construe what a claim covers before deciding that it’s an abstract idea. Oral argument at Alice, and general discussion in this area pays too little attention to the actual limitations of the patent claims. Second, the claims here include a device, a computer, a storage unit, etc. This is an application of how to do escrow, and not even the general idea of escrow, but a specific type of intermediated escrow. Yes, I understand that “Do idea x on a computer” is a claim we worry about, but we have cases like Dann v. Johnston that deal with that on obviousness, and if it wasn’t obvious to “Do idea x on a computer” then that might be the type of claim we want. Bonus trivia: cert. was granted in Dann on a subject matter challenge as well, and the court declined to rule on it, instead ruling only on the obviousness point.

Third, the patent has been attacked as simple and not doing anything earth shattering, but CLS Bank itself claims that this idea was a long time coming, some 20 years. If it could really be implemented with 7 lines of code, why didn’t CLS Bank just do it? Why did it take a couple years even after Alice sought patent protection to implement such an “abstract idea” that everyone claims to have known was necessary? Then again, maybe it’s just a simple invention and Alice was merely the first to write it down when computers and networks got faster. But these are all questions about obviousness – questions that we should be asking and that may well render the patent invalid. But just because we have a gut feel that something might be obvious, that doesn’t mean we should use hindsight many, many years after the patent filing to call it an abstract idea.

Admittedly, this is a broad claim. It might even satisfy our definition of “overly broad” from Life After Bilski and the factors of abstract idea that we identify there. But the Court did not adopt our framework. I worry that more harm than good will come of further nebulous definitions of abstract ideas, which will come until the Court affirms a borderline claim as good enough. Everyone watching this case, whether they favor broad patenting or limited patenting, thinks the lack of rule clarity is a problem. The Court should use this case to set the lowest bar for non-abstractness – it is the only way left to get some clarity.