District Courts Staying Cases Pending CLS Bank, but the Federal Circuit Decides One

07 February 2014 IP Litigation Current Blog

In December, the Supreme Court granted certiorari in CLS Bank Int’l v. Alice Corp., No. 13-298, in which the question presented by the petitioner is “[w]hether claims to computer-implemented inventions — including claims to systems and machines, processes, and items of manufacture — are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?” This will be the fourth recent Supreme Court case addressing § 101 following Bilski, Mayo and Myriad, and many hope the Court will provide more clarity on the application of § 101 to computer-implemented patents. The argument in CLS Bank is scheduled for March 31, 2014, and a decision is not expected until about June 2014. In the meantime, the issue of patent eligibility of various computer-implemented inventions is before the Federal Circuit and district courts in many cases. Will these courts wait until CLS Bank is decided and should they? The Federal Circuit recently decided Smartgene, indicating that at least some cases can be decided based on current Supreme Court and Federal Circuit precedent. The trend of district courts, however, has been to stay computer-related cases with a § 101 issue until after CLS Bank, and therefore defendants should consider filing a motion to stay in such cases. 

The stays are perhaps best illustrated by five related cases: Money Suite Company v. Metlife, Inc., et al. C.A. Nos. 13-1747 – 13-1748 & 13-984 – 13-986 GMS (D. Del. Jan. 9, 2014). The patent in these cases is directed to the abstract idea of using a computer to generate a quote for a financial product, according to defendant Met Life. After Met Life filed a motion to dismiss because the patent fails to claim patentable subject matter, the court sua sponte stayed all five cases. The court determined that the abstract idea exception to patent eligibility, as applied to computer-implemented inventions, has divided the Federal Circuit, and therefore concluded that the interests of justice and judicial economy favored staying the case until further guidance on the issue would be provided by the Supreme Court in CLS Bank.

Similarly, a court in the Northern District of California recently stayed two cases brought against Facebook and LinkedIn. See Bascom Research LLC v. Facebook, Inc. and LinkedIn Corp., Nos. C 12-6293-SI and C 12-6294-SI (N.D. Cal. Jan. 13, 2014). Here, the patents “are directed to computer-implemented inventions that create ‘link relationships’ between ‘document objects’ on a computer network, and assigning ‘attributes’ to those relationships,” as described by the court. The defendants had not even yet filed a motion to dismiss, but instead filed a motion to stay the case because they intended in the future to bring a motion regarding patent eligibility. The court granted the motion, again finding that judicial efficiency favored a stay because CLS Bank may provide “important guidance regarding software patentability.” In particular, the court thought it wise to delay claim construction because it might not be required prior to evaluating patent eligibility, or might at least be impacted by CLS Bank.

While many district courts are staying cases, the Federal Circuit recently decided a § 101 case involving a computer-implemented patent. In Smartgene, Inc. v. Advanced Biological Labs., No. 2013-1186 (Fed. Cir. Jan. 24, 2014) (non-precedential), the Federal Circuit determined that a patent with claims directed to “a method, a system, and a computer program, respectively, for guiding the selection of a treatment regimen for a patient with a known disease or medical condition” was not patent eligible. The court determined that the claims covered the “mental steps of comparing new and stored information and using rules to identify medical options” and that a computer (e.g., “computing device”) was only invoked in the claims to perform its basic functionality of comparing the stored and input data and rules. The Court thus found the case similar to CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1373 (Fed. Cir. 2011), in which the court explained that neither mental processes, nor processes that merely invoke a computer and its basic functionality for implementing such mental process, are patent eligible. The court also found that Smartgene’s process was similar to the one in Gottschalk v. Benson, 409 U.S. 63 (1972), because it can be carried out without a computer or, alternatively, using existing computers. And, the court found that its reasoning was reinforced by Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012). Mayo requires that if a claim involves an abstract idea, the claim must include “enough” that is beyond “well-understood, routine, conventional activity” to be patent eligible. Id. at 1294, 1298, 1299. The court held that the claim in Smartgene’s patent did not meet this requirement because “it calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information-comparison and rule-application processes.” Finally, the court determined that its decision was consistent with other post-Mayo precedent, and therefore held that the claims were not patent eligible.

One interesting aspect of Smartgene is that Judge Taranto is the author of the opinion. He did not participate in the en banc CLS Bank decision. This opinion indicates that if he had, rather than the per curiam opinion in CLS Bank, there likely would have been a majority opinion finding all the claims patent ineligible and confirming that the claims only add generic computer functions to an abstract idea, which is insufficient to satisfy § 101.

Smartgene also shows that the Federal Circuit is willing to decide § 101 cases based on current precedent, rather than waiting for CLS Bank.

The practicalities of district court litigation and appellate practice may explain the differences between the courts staying cases and the Federal Circuit deciding Smartgene prior to CLS Bank. Trial courts, and the parties in the case, typically face claim construction, infringement/invalidity contentions and discovery issues, in addition to the motion contesting patent eligibility itself, all of which can potentially be avoided by a stay. The Federal Circuit, and parties on appeal, do not have these same tasks and expenses. Smartgene also shows that if it is clear that the computer implementation in a claim adds nothing more than conventional computer tasks, however, a court may hold the patent to be ineligible by applying current precedent, without waiting for CLS Bank. In any event, defendants with § 101 arguments in computer-related cases should consider moving to stay pending CLS Bank, particularly if the case in its early stages, when it will likely be the most judicially efficient to stay the proceedings.

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