SEPT 2017
Shearman & Sterling’s Digest on Federal Circuit
Jurisprudence Concerning the ‘Abstract Idea’
Exception to 35 U.S.C. § 101
Introduction
At first glance, the development of Section 101 jurisprudence
appears chaotic. The Supreme Court captured several
different kinds of problems in Alice and its earlier patentable-
subject-matter opinions, and the Federal Circuit’s post-Alice
approach has multiplied the problem by tangling several
different legal threads in a way that has not so far resulted in
clear, consistent statements of law. In this article, we attempt
to describe and characterize the primary threads of the
current view of Section 101, as illustrated in appellate
opinions to date.
One problem is easily recognized and should be quickly dismissed: confusion between
prior-art invalidity and ineligible subject matter. While it is possible to use a prior-art
analysis to inform a Section 101 determination—and both the Federal Circuit and the
Supreme Court have done so, as described below—it isn’t necessary, and tends to
confuse the issues, as other Federal Circuit opinions have noted. If what is described in
the claims is not novel, or is only an obvious variation on the prior art, then it should
be unpatentable for those reasons, without the need to consider Section 101. The
converse is true as well. Of course, procedural and evidentiary issues can in some
cases make segregating the two problems sound easier than it is.
A core issue is functional claim language. One commonality between many claims that
were found ineligible, especially method claims and software-related claims, is that
they mainly recite the function to be performed, not how to do it. Claims held to be
directed to abstract ideas often contain limitations like, “facilitate a user selection of
In this issue:
INTRODUCTION ...................... 1
SECTION 101 AND ALICE,
REVISITED .............................. 3
THE ‘DECISIONAL
MECHANISM’ AND THE
BLURRED LINE BETWEEN
ALICE STEPS .......................... 5
WHAT IS AN ‘ABSTRACT
IDEA’ ANYWAY? .................... 7
SPECIFIC CASE STUDIES ON
CATEGORIES OF ELIGIBLE
CLAIMS .................................. 13
AREAS OF ONGOING
CONFUSION .......................... 34
KEY LESSONS FOR
PROSECUTORS AND
LITIGATORS.......................... 38
MISCELLANEOUS ISSUES .. 41
CONCLUSION ....................... 45
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content,”
1
“generating a rule for monitoring audit log data representing at least one of
transactions or activities that are executed in the computer environment . . . the rule
comprising at least one criterion related to accesses . . .,”
2
or “deriving a composite
indicator of reliability that is an indicator of power grid vulnerability and is derived
from a combination of one or more real time measurements or computations of
measurements.”
3
But because the claims themselves do not describe how to “facilitate”
user selection, “generate” the rule or “derive” the indicator, they cover a nearly infinite
set of ways of performing those functions. Such claims usually can be saved from
ineligibility, if at all, only if the “how” is imported into the claims by claim
construction, and sometimes only then if the “how” involves an unconventional
approach.
Another core issue is claim language describing mental steps. The mental-step
prohibition is a product exclusively of judicial decisions. Unlike claims reciting purely
functional language (which can be seen as literally outside of Section 101 because,
without a “how,” they are describing neither processes nor machines), claims
determined to be ineligible because they are directed to mental steps—which are a
kind of algorithm, also a forbidden class of subject matter—fall within what is literally
an exception to the statute’s broad “process” language. They are ineligible despite the
fact that they literally describe a “process.”
Sometimes these threads are not apparent in the text of judicial opinions, but when one
goes beyond the court’s characterization or reasoning and takes a careful look at the
claim language in question, usually one or more of these threads do appear. As such,
this article looks back at some of the Federal Circuit’s most noteworthy post-Alice
decisions in a search for guiding principles that separate eligible from ineligible
subject matter.
4
1
Affinity Labs of Texas, LLC v. Amazon.com Inc., 838 F.3d 1266 (Fed. Cir. 2016) (“Affinity Labs I”).
2
FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089 (Fed. Cir. 2016).
3
Electric Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).
4
Some commentators—including former PTO Director David Kappos—have called for the abolition of Section
101 altogether. See, e.g., https://www.law360.com/articles/783604/kappos-calls-for-abolition-of-section-101-of-
patent-act. Judge Newman has all but urged as much as well.
3
Section 101 and Alice, Revisited
Section 101 broadly states:
Whoever invents or discovers any new and useful process, machine, manufacture,
composition of matter or any new and useful improvement thereof, may obtain a
patent therefor, subject to the conditions and requirements of this title.
Nonetheless, the Supreme Court has “long held that this provision contains an
important implicit exception. ‘Laws of nature, natural phenomena, and abstract ideas
are not patentable.’”
5
The primary concern driving this exclusionary principle is pre-
emption; patent law should not “‘inhibit further discovery by improperly tying up the
future use of’ these building blocks of human ingenuity.”
6
In Alice, the claims-at-issue concerned a computerized scheme for mitigating
“settlement risk”—i.e., the risk that only one party to an agreed-upon financial
exchange will satisfy its obligation. The agreed-upon representative method claim
recited:
A method of exchanging obligations as between parties, each party holding a credit
record and a debit record with an exchange institution, the credit records and debit
records for exchange of predetermined obligations, the method comprising the steps
of:
(a) creating a shadow credit record and a shadow debit record for each
stakeholder party to be held independently by a supervisory institution from the
exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance for each
shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the supervisory
institution adjusting each respective party’s shadow credit record or shadow debit
record, allowing only these transactions that do not result in the value of the
shadow debit record being less than the value of the shadow credit record at any
time, each said adjustment taking place in chronological order; and
(d) at the end-of-day, the supervisory institution instructing on[e] of the exchange
institutions to exchange credits or debits to the credit record and debit record of
5
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 70 (2012) (quoting Diamond v. Diehr, 450
U.S. 175, 185 (1981)).
6
Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014) (quoting Mayo, 566 U.S. at 85).
