April 13, 2012 Top Story

Court Misses Chance to Tackle Unpatentable Abstract Ideas

Federal Circuit holds claims are not patent-eligible, but definition of "abstract ideas" remains murky

Christina Michelle Jordan

The Federal Circuit recently issued an opinion that attempts to tackle the concept of “unpatentable abstract ideas” addressed by the Supreme Court in 2010 in Bilski vs. Kappos. It appears, however, that the court missed an opportunity to provide a clear definition of what constitutes such an abstract idea. As a result, experts expect courts to continue to have to feel their way on this point.

Business Method Patents and Unpatentable Abstract Ideas

In Bilski, the Supreme Court held that claims disclosing a process for commodities traders to hedge against risk in the energy market are directed to an unpatentable abstract idea. The Court compared the process in Bilski to the 1981 Supreme Court decision in Diamond v. Diehr.

In Diehr, the Court found patentable a method for “molding raw, uncured synthetic rubber into cured precision products” using the application of an abstract idea, or mathematical formula, and a computer. Thus, while courts recognize that there may be an acceptable increment of “abstract ideas” within a patent, at some point the level of abstraction becomes so great as to render the invention unpatentable.

In Fort Properties Inc. v. American Master Lease LLC, the Court of Appeals for the Federal Circuit considered whether a real estate investment tool falls under the “process” category of patent-eligible subject matter under the Patent Act, 35 U.S.C. § 101. The patent included 41 claims, with claims 32–41 requiring the use of a computer.

American Master Lease asserted that the investment process “need not be performed by a computer.” American Master Lease argued that its invention “constituted a patentable process and not an abstract idea,” explaining that the process requires steps that involve real property, deeds, and contracts. Fort Properties argued that the invention was an unpatentable abstract idea.

The Federal Circuit compared the claims of the patent to Bilski, stating that several of the claims similarly “disclose an investment tool not requiring the use of a computer.” The court held that the invention is an abstract concept, similar to Bilski. The court stated that the decision was in accordance with other recent Federal Circuit decisions in which the physical effect of real property, deeds, and contracts was insufficient to render the claims patentable.

Opinion Does Not Define “Unpatentable Abstract Idea”

The Federal Circuit relies on the term “unpatentable abstract idea” throughout the opinion; however, “[the court] did not make the definition clear in this case,” says Bill Sigler, Washington, D.C., cochair of the Patent Subcommittee of the ABA Section of Litigation’s Intellectual Property Litigation Committee.

The court avoids defining unpatentable abstract by comparing the claims to those in Bilski. The court “was looking at how closely the claims lined up with the claims in Bilski, and found them to be so similar that they had to conclude that the claims were unpatentably abstract,” says Sigler.

The court states that the claims of the patent in Fort Properties “recite an abstract real estate investment tool. When viewing the claimed invention as a whole, the physical activities involving the deeds, contracts, and real property are insufficient to render these claims patentable.”

“Notions of legal concepts such as taxes or ownership or money—those would all fall within the purview of an abstract idea like in the Bilski case,” says Robert M. Asher, Boston, cochair of the Patent Subcommittee of the Section of Litigation’s Intellectual Property Committee. “The claimed subject matter in the Fort Properties case is more conceptual, whereas in the Diehr case, there is an industrial process for making an actual product” Sigler adds. “There was nothing tangible claimed [in Fort Properties],” Sigler concludes.

Business Method Patents with Limitations

While the opinion does not define unpatentably abstract idea, it does provide guidance for patentability of business methods using a computer or hardware. Sigler notes that “the court treated the claims that recited using a computer differently, and engaged in additional analysis on those claims.” The court’s additional analysis of the claims reciting a computer limitation explained that a computer or hardware should be “linked more specifically to the invention,” adds Sigler.

The court, citing the 2011 CyberSource Corp. v. Retail Decisions, Inc. and Ultramercial, LLC v. Hulu, LLC cases, advises that “to impart patent-eligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine ‘must impose meaningful limits on the claim’s scope.’” For example, the court, noted, an invention “[requiring] intricate and complex computer programming” and “specific application to the Internet and a cybermarket environment” would satisfy the patentable subject matter requirement.

In Fort Properties, the Federal Circuit found that the use of a computer was an “insignificant post-solution activity.” Instead, claims may be patent eligible when “the invention itself involve[s] ‘advances in computer technology.’”

“The claims would need to include the intricacies of the computer programing or of the data structures that are involved, or of the communication technology that’s being used to receive or send data,” says Asher. “Simply reciting computer-based, or using a computer, will not avoid the [35 U.S.C. §] 101 issues that have invalidated the claims in Bilski or Fort Properties,” Asher adds.

Business Method Patents after Fort Properties

How should litigators approach business method patents with computer limitations? “Anyone seeking to patent inventions in the areas that relate to taxes, ownership, or money will need to focus even harder on the computer programing and the data structures that are being relied upon in their invention,” says Asher.

After the Fort Properties decision, litigators should more particularly define the scope of the computer limitation of the invention. “The court stated that the claim construction that the patentee agreed to for using the computer limitation was so broad and general, that it didn’t impose any meaningful limits on the claim scope,” observes Sigler. “[Patentees] need to be wary about proposing, or agreeing to, a construction for the term relating to a computer that’s too broad or general,” adds Sigler.

Asher notes that the court did not say that investment process patents are unpatentable subject matter. “These claims did not push the court to that limit,” he cautions, “we are still waiting to see how far the court will go.”

Christina Michelle Jordan is an associate editor for Litigation News.

Keywords: litigation, intellectual property, business method patents, Federal Circuit, Bilski v. Kappos

Related Resources

Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).