PATENTABILITY OF A COMPUTER PROGRAM IN LIGHT OF
BANCORP SERVICES, LLC v. SUN LIFE ASSURANCE COMPANY OF
Authored by: Arushi Gupta* & Sanjana Patnaik**
*4th Year BBA LLB Student, O.P. Jindal Global University
**4th Year BBA LLB Student, O.P. Jindal Global University __________________________________________________________________________________
The United States Patent and Trademark Office has recently introduced conditions for ascertaining software patentability to achieve uniformity in the inspection of patent applications. This is the result of ambiguous judgments pronounced by the US courts that led to a reduction in the credibility of the US Patent system. The US Federal Court in 2012 rendered two inconsistent decisions on a similar set of facts within a duration of two weeks. In the Bancorp Services. LLC v. Sun Life Assurance case, Bancorp owned two patents that provided computerised means of administering and tracking the value of life insurance policies. The court posited that the claims were nothing more than abstract ideas and thus patent ineligible. However, in the CLS Bank v. Alice case, the court stated that patents which disclosed a computer-implemented scheme for mitigating settlement risk during financial transactions via a third-party intermediary is patent eligible. The courts have fell short to put forth a consistent test that could have led to elimination of uncertainties regarding the inspection of patentable subject-matter. This paper discusses the concerns that arose due to the contrary rulings while throwing light on an alternative test that might ensure consistency while examining the patent applications.
The issue of patentability of computer programs has been a highly debatable matter in all jurisdictions across the world, and the United States (“US”) is no exception to this. Throughout the years, the courts have been applying numerous tests to decide upon the patentability of a claim, however, all those efforts have been in vain as this has significantly reduced the possibility of having a uniformity in scrutinizing the patent eligible applications. This paper will analyses the issues concerning the patentability of computer programs since opposing decisions were rendered in two similar patent cases in 2012. Part I of the paper analyses the contrary ruling of the two cases by the Federal Circuit and the controversies surrounding these decisions. Part II lays down the present law that is being applied while examining the patent eligibility of claims. Part III discusses the uncertainties resulting from the interpretations of the courts while applying the Alice two-step test. Part IV states the reforms suggested by USPTO in determining the patent eligibility of a subject matter. Further, it explores an alternative test i.e., the ICoMSE test and applies it to the factual scenario of Bancorp to decide the feasibility of the test.
IMPACT OF CONTRARY RULING OF TWO SIMILAR PATENT CASES
A. Brief Description of Bancorp Services. LLC V. Sun Life Assurance Case: Bancorp owned two patents that provided computerised means of administering and tracking the value of life insurance policies.1 Bancorp sued Sun life for infringement of the said patents.2 The US district court held in favour of Sun life stating that the claims were patent ineligible subject matter.3 In doing so, the court applied the machine and transformation test and opined that the claims do not involve anything novel other than transforming the raw data into some more data.4 On appeal, the Federal Circuit (“FC”) posited that the claims were nothing more than abstract ideas and thus invalid under section 101.5 The court stated that computer implementation of the specific algorithm might turn the abstract idea into patent eligible subject matter.6 However, this is only possible when “a computer
1 Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada, 687 F.3d 1266, 5, (Fed. Cir. 2012). 2 Id. at 7.
3 Id. at 7. 4 Id. at 8. 5 Id. at 12. 6 Id. at 10.
is integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not”.7 By citing Sirf Technology v. International
Trade Commission, the court posited that, “In order for the addition of a machine to
impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly”.8 Therefore, the court held that an abstract idea cannot be made patent eligible simply because the calculations could be performed efficiently through a computer.9
B. Analysing CLS Bank V. Alice Corp. (Federal Circuit 2012): Two weeks before the outcome of the Bancorp case, a contrary judgment was passed by the court in Alice case. In this case, CLS Bank challenged the validity of Alice’s patents which disclosed a computer-implemented scheme for mitigating settlement risk during financial transactions via a third-party intermediary.10 The FC, in 2012, reversed the lower court’s decision and held that the claims were patentable.11 The court relied upon the machine and transformation test and evaluated whether there existed sufficient limitations by the machine on the patent.12 Based upon this analysis, the court held that the claims had sufficient computer limitations and hence, they were not directed to an abstract idea.13
The majority stated that the judicial exceptions should not be applied to patent eligible subject matter frequently.14 The court posited that "disqualifying characteristics of
abstractness must exhibit itself manifestly to override the broad statutory categories of patent eligible subject matter.”15 Further, the concept of pre-emption was utilized by the court to ascertain whether a claim was directed to a patent eligible subject matter.16 Additionally, the court opined that pre-emption by an abstract idea over all other fields should be discouraged as it will result in monopolisation of the whole idea.17 However, in
7 Id. at 3.
8 Id. at 11 (citing SiRF Tech., 601 F.3d). 9 Id. at 12.
10 CLS Bank Int'l v. Alice Corp. Pty., 6, 685 F.3d 1341 (2012). 11 Id. at 1.
12 Id. at 9. 13 Id. at 9. 14 Id.
15 Id. at 11 (citing Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010). 16 Id. at 9.
this case, the majority held that the claim contained sufficient computer limitations, so it could not be said to pre-empt an entire fundamental idea, thus ruling in favour of Alice Corp. on the matter of patentability.18
Further, in 2013 the FC vacated its decision and granted an en banc hearing, but the Court was inconsistent in its legal rationale in determining the patent eligibility of the claim.19 This vacation by the FC followed by an apparently contradictory decision in the Bancorp case just two weeks later, paved the way for a lot of controversies and criticisms.20
C. Alice-Bancorp Debate: The court, in the Bancorp case, tried differentiating the current case from the Alice case by stating that the former lacked specific application of the inventive concept.21 However, this argument was criticised, stating that the court arrived at inconsistent decisions on a seemingly similar set of facts i.e., both the claims involved implementation of methods on computers which could easily be carried out manually, though less efficiently.22 This ultimately resulted in a petition being filed in the Supreme Court (“SC”) in 2014 wherein the SC held the claim to be patent ineligible by extending the Mayo test, which later came to be known as the Alice/Mayo two-step test.23
The court in Alice case placed heavy reliance on the machine and transformation test and based its entire opinion on the argument of computer implementation.24 By this logic, any claim which has sufficient evidence of computer implementation can be regarded as patent eligible, completely disregarding the abstract idea judicial exception.25 This is problematic as the majority itself posited that mere implementation of an algorithm onto a computer is not sufficient to make a claim patent eligible.26 Moreover, the court did not even try to
18 Id. at 11.
19 CLS Bank Int'l v. Alice Corp. Pty. Ltd., 484 Fed. Appx. 559, 2012 U.S. App. LEXIS 20906 (Fed. Cir., Oct. 9,
20 Patent Law — Patentable Subject Matter — Federal Circuit Holds That Certain Software Method Claims Are Patent Ineligible. — Bancorp Services, L.L.C. v. Sun Life Assurance Co. of Canada (U.S.), 687 F.3d 1266 (Fed. Cir. 2012), 126 HARV. LAW REV. 810, 814-815 (2013).
21 Supra note 1, at 10. 22 Supra note 20, at 814.
23 Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014).
24 Joseph Holland King, Software Patentability after Prometheus, 30 GA. ST. U. L. REV. 1112, 1124-1125
25 Dina Roumiantseva, The Eye of the Storm: Software Patents and the Abstract Idea Doctrine in CLS Bank v. Alice, 28 BERK. TECH. L. J. 569, 577 (2013).
evaluate the inventive nature of the claim, which is a key aspect of the patent law.27 On the other hand, the court in the Bancorp case rejected the patent eligibility of the claim based on the lack of inventiveness of the claim.28
ALICE TWO-STEP TEST AND SECTION 101 APPLICATION
According to section 101, inventions belonging to one of the four categories i.e., processes, machines, manufacturers, and compositions of matter are eligible for being regarded as patentable.29 The courts have interpreted these categories to exclude abstract ideas, laws of nature, and natural phenomena.30 This was done as the courts believed granting patent rights under any of these exceptions might impede innovation.31 However, an invention cannot be contemplated as patent ineligible merely because it falls under the above-mentioned exceptions. Therefore, the SC has set up a two-step test to ascertain the patent eligibility of a subject matter.32 The first step (Step 2A) is to determine whether the claims are directed to the judicially recognized exceptions.33 If the answer is in the affirmative, then the court further goes on to ascertain whether the additional elements of the claim contain an inventive concept that is sufficient to transform the claim into a patent eligible application under step 2B of the test.34 This has been done since the courts felt that the patents which transform these building blocks into something significantly more, while enhancing its practicability, should not be held to be patent ineligible merely because it falls under any of the exceptions.35 However, it is pertinent to note that fulfilling the two-step test does not mean that the invention will automatically receive patent protection. It needs to satisfy certain additional criteria i.e., the invention must be novel (section 102), non-obvious or inclusive of inventive step (section 103), and fully and properly described (section 112).36
27 Id. at 13.
28 Supra note 1, Since it did nothing more than converting some data into some more data and that it could
easily be performed manually.
2935 U.S.C. § 101.
30 Diamond v. Chakrabarty,447 U.S. 303 (1980).
31 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, (2012).
32 Supra note 23.
33 United States Patent and Trademark Office, Patent Subject Matter Eligibility 2-4 (2019). 34 Id.
35 Supra note 31, at 89. 36 Supra note 33, at 2.
Alice changed the jurisprudence of the patent Law in the US since the two-step test has been
consistently cited in many judgments to date. Though Alice has been applied frequently, the consequences of such applications have been inconsistent and unpredictable.37 This can be gauged from the statement of the former Chief Justice of the FC, “The application of Alice has
been excessively incoherent, inconsistent and chaotic”.38 This statement sheds light on the ambiguity of the patentability of computer programs in the US as courts tend to arrive at inconsistent decisions while applying the same Alice test.
In the Enfish case, the FC decided that a model for computer databases which was designed to improve the system’s data storage and retrieval capacity in memory was patent eligible.39 The Court stated that the claims were directed to an improvement in computer’s functionality rather than being mere abstract ideas.40 By citing Alice, the court posited that "the plain focus of the
claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity”.41 The court found that the claimed
subject matter reduced the duration of search and required a smaller memory than before.42 Since the claims were not abstract ideas, the court found it unnecessary to proceed to step 2B of the test.43 On the flip side, the FC, in the TLI Communications case, held that an improved technique of transmitting and organizing digital images was directed to the use of conventional technology (abstract idea) and did not constitute an inventive concept, and thus it was patent ineligible.44
It must be noted that the Court in Alice case pronounced that the draftsman’s art should not be the factor of determining the eligibility of the patent.45 However, this has been the situation in most post-Alice decisions, as seen in the Enfish and TLI Communications cases. For instance,
37 Benjamin W. Hattenbach & Rosalyn M. Kautz, Concrete Thoughts about Abstract Ideas: Why a Nebulous
Exception to Patentability Should Not Swallow Computer Software, 58 Santa CLARA L. REV. 261, 274-275
38 Paul Michel, former Chief Judge of the Federal Circuit, Congress, (2019). 39 Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1339 (Fed. Cir. 2016). 40 Id. at 1335.
42 Id. at 1337. 43 Id. at 1339.
44 In re: TLI Communications LLC Patent Litigation, 823 F.3d 607, 611 (Fed. Cir. 2016). 45 Supra note 23, at 2347, 2350.
the claims in both these cases were directed to the same abstract idea i.e., improved data storage and management of digital images.46 The inventions in both the cases could be implemented in computers or phones uploaded with the correct software.47
The above analysis shows the inconsistency with which the Alice test and Section 101 was applied. For one court, the claim was an improvement to computer functionality whereas, for another court, the similar claim was an abstract idea with no inventive concept. This shows that the consequences of the application of Alice have been unpredictable leading to arbitrary results.
These confusions and uncertainties are due to the lack of clarity in certain terms used in the judgment. For instance, the definition of ‘abstract idea’ was left open to be interpreted by the SC.48 Further, the threshold required to transform an abstract idea into something significant more or the term ‘the inventive concept’ also lacks certainty.49 Due to the absence of an unequivocal definition, the FC has depended on the common law analogies to decide the patent eligibility of a subject matter.50 This is problematic since it can result in a multitude of interpretations, resulting in contradicting decisions as seen in the aforementioned cases.
A. Reforms Proposed By Uspto To Section 101 Application: The ambiguity of the judgment in Alice followed by the inconsistency of decision making by the FC in the context of Section 101 jurisprudence has resulted in the invalidation of thousands of patents including some worthy patents51 as well. These undefined contours of determining patent eligibility had led to the diminution of the credibility of the US patent system. Due to the problematic adjudication and threshold set forth in Section 101, many critics have argued that the competitiveness in the patent industry is being impeded.52 Section 101 is reducing the
46 Supra note 37, at 283. 47 Id.
48 CRS Report, Patent-Eligible Subject Matter Reform in the 116th Congress 20 - 22 (2019). 49 Id.
50 Supra note 37, at 280.
51 American Axle & Manufacturing, Inc. v. Neapco Holdings LLC, No. 18-1763 (Fed. Cir. 2019). 52 Supra note 48.
incentives to innovate and hence driving investment to other countries.53 Against this backdrop, the United States Patent and Trademark Office (“USPTO”) has released revised guidelines to provide more clarity and consistency for determining patent subject matter eligibility.
Under the revised guidance, there are two steps for determining the eligibility of a patent application.54 In Step 1, the patent should belong to one of the four statutory categories under Section 101.55 In Step 2, the patent must satisfy the Alice test. Step 2A now comprises of a two-prong assessment, (1) whether the patent claims are directed to a judicial exception, and (2) whether the claim “as a whole integrates the recited judicial exception into a practical
application of the exception”.56 The first prong of Step 2A has created three categories of
abstract idea exceptions i.e., “mathematical concepts, certain methods organizing human
activity, and mental processes”.57 Any patent claim that does not fall into one of these
categories cannot be considered as an abstract idea exception, barring some rare circumstances.58 The second prong says that the PTO cannot treat the claim as directed to judicial exceptions “if the claim as a whole integrates the recited judicial exception into a
practical application of the exception” and hence, considered as patent eligible without
examining the inventive concept test i.e., step 2B of the test.59 However, if a patent fails to fulfil Step 2A, then the patent claim needs to be examined in Step 2B.60
The 2019 PEG was a positive initiative since it created a commonality of understanding for the stakeholders primarily the USPTO, the patent applicants, and the judiciary. Under this, an extensive grouping of abstract ideas which provides more clarity and specificity of patentable subject matters replaced the earlier ‘Eligibility Quick Reference sheet identifying abstract ideas.’61
Though the guidance was issued to increase the predictability and lucidity in the application of Section 101, however, to say that the revised guidelines would eradicate ambiguity in its
54 Sangik Bae, Overcoming Abstract Idea Exception of Patent Subject Matter Eligibility under 2019 Revised
Patent Subject Matter Eligibility Guidance, 18 J. MARSHALL REV. INTELL. PROP. L. 382 (2019).
55 Id. at 384 – 389. 56 Id. 57 Id. 58 Id. 59 Id. 60 Id. 61 Supra note 48, at 30-32.
entirety would be incorrect. The term ‘practical application’ is left undefined in the same way the term ‘significantly more’ was undefined in the Alice test. Additionally, there is hardly any difference between the test for ‘practical application’ in Step 2A and the test for ‘inventive concept’ in Step 2B.62 Both tests need to be ascertained by inspecting whether the claim included certain additional elements that provided some relevant limits on the judicial exceptions.63
Another change that was incorporated in the guidance was the examination of the claims directing to a well-understood, routine and conventional (“WURC”) activity which is considered at Step 2A and its analysis is exempted from Step 2B.64 Doubts are being cast whether this change has expanded Step 2A to an extent where Step 2B has just become a subpart of Step 2A.65 Further, if the practical application cannot be established in Step 2A even with the usage of WURC activity, it is tough to understand how the presence of the inventive concept can be established without the usage of WURC activity.66 Hence, the utility of the ‘inventive concept’ test in the presence of the ‘practical application’ test is questionable.67
Thus, the new guidance is a welcome effort as it creates a uniform playfield for all the patent eligible applications to be subjected to scrutiny, however, complete elimination of ambiguity and uncertainty in patentable subject matter is inevitable. However, it is important to note that the guidance released by PTO has no legal effect since the PTO does not have the authority to form substantive rules.68 The revised guidance has itself mentioned that it does not have a binding effect in the court of law and can just be utilized as a tool for internal management.69
B. ICoMSE Test: The machine or transformation test is not the sole test for determining patent eligibility, nevertheless it is still an important test.70 But sometimes the courts tend to use this test beyond its limits, resulting in wrong decisions. This was seen in the Alice case where the FC placed heavy reliance on this test and delivered a faulty judgment based
62 Stephen P. Scuderi, A Primer On the USPTO’s 2019 PEG, HFRM Today (2019). 63 Id. 64 Id. 65 Id. 66 Id. 67 Id. 68 Supra note 61. 69 Id.
on the same. An alternative to this overly used test can be the ICoMSE71 test for determining the eligibility of a patent application.
The ICoMSE test is a three-element test that consists of an inventive concept, the amount of market success achieved by the invention, and the number of embodiments disclosed by it.72 As per this test, the mere usage of the inventive concept test is not enough to decide on the patentability of a claim.73 Thus the ‘inventive concept’ factor needs to be used concomitantly with other factors.74 The second factor is to ascertain how successful the invention is in the marketplace.75 This will help in evaluating whether the invention is mostly abstract in character or has a more practical significance.76 The courts already use this factor in a limited sense while ascertaining the obviousness of the invention.77 The last factor, which is one of the requirements of section 12 as well, is the number of embodiments disclosed by the invention.78 More the number of embodiments disclosed, the higher is the likelihood of the invention being considered as something more than just an abstract idea.79 Thus, it is better to keep the claim as broad as possible by disclosing multiple embodiments.80
Applying this to the facts of Bancorp, under the first factor, the court should ascertain if the patent claim i.e., the system for tracking and administering the value of life insurance policies81, carries an inventive concept. The Court analysed this in detail and concluded that the invention did not improve the functioning of the computers, rather it simply used the computers to improve the administration of life insurance policies.82 Thus, the claim lacks an inventive concept, pointing towards the invalidity of the patent. Further, under the second factor, though not discussed explicitly by the court, the fact that Bancorp sued Sun Life for infringing its patent83 indicates a certain level of market success, thus, pointing towards its patent validity.
71 Abbreviation for Inventive Concept, Market Success, and number of embodiments. 72 King, supra note 24, at 1142-1144.
73 Id. 74 Id. 75 Id. 76 Id. 77 Id. 78 Id. 79 Id. 80 Id. 81 Id. 82 Supra note 1. 83 Id.
Lastly, under the third factor, each of the two patents in Bancorp revealed just one embodiment.84 This decreases the probability of the invention being something more than an abstract idea. Hence, this factor points towards the invalidity of the patent. In a nutshell, these factors direct towards the invalidity of the patent, which is in consonance with the findings in the Bancorp case.
This paper analyzed the concerns relating to the two inconsistent decisions rendered by the FC on a similar set of facts within a duration of two weeks. The ruling pronounced in the Alice case received a lot of backlash owing to the panel’s inconsistent decision-making. These controversies and criticisms ultimately resulted in the SC to establish a two-step test for determining the patent eligibility of a subject matter. This test was expected to reduce the inconsistencies posed previously; however, the multitude of interpretations by the courts in applying the test resulted in furthering the ambiguities. The mess created by the courts while determining the patent eligible subject matter has reduced the credibility of the US Patent system. It is in this context that the USPTO decided to revamp the conditions for determining the patentability to bring about uniformity in the inspection of patent applications. Nevertheless, it further ended up creating a new set of problems or ambiguities. This reveals that there is a long way before attaining complete elimination of uncertainties in the patentable subject matter. Additionally, the paper also suggested that the machine and transformation test has been used profoundly by the courts beyond its scope. Thus, the ICoMSE test can be an alternative to this test which can be used in situations where the machine and transformation test does not apply. Therefore, the machine or transformation test need not be abandoned entirely, rather its usage can be limited to circumstances where the invention consists of a machine limitation.