Federal Circuit Breathes New Life Into § 101 Challenges

11 May 2013 IP Litigation Current Blog

Today, the Federal Circuit issued a fractured decision in CLS Bank v. Alice Corp. (Fed. Cir. 2013) that may breathe new life into challenges to patent validity under 35 U.S.C. § 101. Despite seven different opinions from the en banc Court, none of which garnered a majority, the Court affirmed that the software-oriented patent claims at issue were not directed to patent eligible subject matter. Of note is the fact that the claims at issue included claims directed to: a method or process; a computer-readable-medium; and a computerized system (though the court was evenly split on the issue of whether the system claims were patent eligible). Also of note is the fact that the claims at issue provided a fair amount of detail, unlike claims at issue in some prior § 101 decisions (such as Bilski). Even without a precedential opinion, CLS Bank provides a springboard for § 101, even in situations where arguments may have previously been considered weak.

Despite opening the door a little wider for § 101 challenges, the lack of certainty provided by the Federal Circuit leaves practitioners and clients in the unpleasant position of determining when and if to assert an invalidity challenge under 35 U.S.C. § 101. The lack of clear precedent assures that attempts to challenge patent eligibility will likely be hotly fought in district court and on appeal (i.e. expensive). However, a challenge under § 101 may also present an opportunity for cutting off litigation at it’s early stages. Indeed, in CLS Bank summary judgment was granted prior to claim construction, though the Federal Circuit cautioned that this might not always be appropriate, reiterating the district court’s discretion in managing its docket.

CLS Bank bank might also have immediate implications at the Patent Trial and Appeal Board (PTAB) through petitions for Covered Business Method (CBM) review, where challenges under § 101 are allowed. A § 101 challenge may be particularly appropriate for CBM proceedings considering the likely overlap between concepts considered “abstract ideas” and those intended to fall under CBM’s purview.  Both CLS Bank and Bilski concerned patent claims that were arguably directed to a “financial product or service”, a requirement for filing CBMs that has so far been broadly interpreted by the PTAB.  It will be interesting to see what weight, if any, the PTAB accords the differing analysis in CLS Bank.

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