A Level of Abstraction Approach for Post-Bilski §101 Analysis.

Burn the litmus paper, trash the cookie cutters, and borrow from copyright law by placing a claim dealing with a basic concept on a continuum of levels of abstraction of the concept.

Following the Supreme Court’s Bilski
¹Bilski v. Kappos, No. 08-964, 561 U.S. ___ , 130 S. Ct. 3218, 95 USPQ2d 1001 (2010) (80 PTCJ 285, 7/2/10). decision, many business method, software, and internet patent claims will draw Section 101 challenges that require a lower court to decide whether a claimed method covers a banned abstract idea or a permitted application thereof. The Supreme Court justices certainly know an undeserving patent claim when they see it, but how can patent drafters and lower courts share that vision?

This article proposes a process for analyzing patent subject matter eligibility by placing the language of a particular claim along a continuum of levels of abstraction of a basic concept included in the claimed invention. Charting the level of abstraction helps in determining whether the claim is too abstract to satisfy the text and purpose of the patent law.

This approach follows the Supreme Court’s trend toward less formulaic tests, exemplified by the predictability analysis of KSR
²KSR
International Co. v. Teleflex Inc., 550 U.S. 398, 82 USPQ2d 1385 (2007) (74 PTCJ, 5/4/07). for determining obviousness.

The Supreme Court Test Seen Through the Lens of the Federal Circuit in CLS Bank

Providing only an open-ended treatment of what is abstract for patent eligibility purposes, the Supreme Court in Bilski turned to the facts and decided that “the patent application at issue here falls outside of §101 because it claims an abstract idea.” ³Bilski, 130 S. Ct. at 3230. The Bilski court refused to adopt “categorical rules that might have wide-ranging and unforeseen impacts.” ⁴Id. at 3229. Applying an abstract idea “test” without instructions for analysis continued an unhappy practice begun long ago in Supreme Court precedents that list “abstract ideas” as specific exceptions to patent eligibility. ⁵See cases discussed in Bilski at 3225, 3229-31.

The Federal Circuit’s recent decision in CLS Bank applies the Supreme Court’s precedent to a computer-implemented process that manages a set of dual escrow accounts to help assure performance of a deal on both sides. When two banks agree to a currency exchange, there is a risk that, at settlement time, one bank will no longer have enough money to satisfy its obligation to the other. The asserted patent claims seek to minimize this risk. The court noted:

Any claim can be stripped down, or simplified, removing all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed. But nothing in the Supreme Court’s precedent, nor in ours, allows a court to go hunting for abstractions by ignoring the concrete, palpable, tangible, and otherwise not abstract invention the patentee actually claims. It is fundamentally improper to paraphrase a claim in overly simplistic generalities in assessing whether the claim falls under the limited “abstract ideas” exception to patent eligibility under 35 U.S.C. §101. Patent eligibility must be evaluated based on what the claims recite, not merely on the ideas upon which they are premised. ⁶CLS Bank International v. Alice Corp., No. 2011-1301 (Fed. Cir. July 9, 2012) (84 PTCJ 391, 7/13/12), slip op. at 19.

The court described the patent eligibility test as follows:

Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. §101. ⁷CLS Bank at 21.

Applying this test to the patented method, the court found it difficult to conclude that the computer limitations of the claimed method do not play a significant part in the performance of the invention or that the claims are not limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties. The court further observed that the asserted claims appear to cover the practical application of a business concept in a specific way, and that the claim limitations can be characterized as being integral to the method, playing a significant part in permitting the method to be performed, and not being token post-solution activity.

Moreover, the court characterized the limitations requiring specific “shadow” computer records as leaving broad room for other methods of using intermediaries to help consummate exchanges, whether with the aid of a computer or otherwise, and, thus, as not appearing to preempt much in the way of innovation. The court did not find it manifestly evident that such claims are patent ineligible under Section 101.

Therefore the claims properly advanced to examination under the other provisions of the patent law.

The Fallacy of ‘Claiming an Abstract Idea': Levels of Abstraction

Although they have failed to define a test for the abstract, the courts sometimes indicate the relative nature of abstractness.

For example, the Federal Circuit in Classen Immunotherapies v. Biogen IDEC has characterized the patent eligibility test as “deciding whether an invention is so abstract as to negate Section 101 subject matter.” ⁸Classen Immunotherapies v. Biogen IDEC, 659 F.3d 1057, 1066, 100 USPQ2d 1492 (Fed. Cir. 2011) (82 PTCJ 650, 9/16/11) (citing Research Corp. Technologies Inc. v. Microsoft Corp., 627 F.3d 859, 869, 97 USPQ2d 1274 (Fed. Cir. 2010), (81 PTCJ 171, 12/10/10) (emphasis added). And in reaching a decision, the court stated: “We conclude that the immunization step moves the ’139 and ’739 claims through the coarse filter of §101, while the abstraction of the ’283 claim is unrelieved by any movement from principle to application.” ⁹Classen, 659 F.3d at 1068 (emphasis added). In Research Corp., another panel (having Chief Judge Randall Rader in common) referred to determining “abstractness” and whether an invention is “so abstract that [it] override[s] the statutory language and framework of the Patent Act,” but then perceived “nothing abstract in the subject matter” in question (emphasis added).

This approach is consistent with the well-known process of abstraction, which has been described as follows:

Abstractions may be formed by reducing the information content of a concept or an observable phenomenon, typically to retain only information which is relevant for a particular purpose. For example, abstracting a leather soccer ball to the more general idea of a ball retains only the information on general ball attributes and behavior, eliminating the other characteristics of that particular ball. ¹⁰Wikipedia, http://en.wikipedia.org/wiki/Abstraction.

Of course a physical ball is not an abstract idea even though its description is more abstract than that of a soccer ball. A description of an underlying abstract idea would be the mathematical concept “sphere” without any physical attributes. Levels of abstraction can be charted, as shown below.

As these examples demonstrate, descriptions of methods as well as descriptions of objects may fall along a progression or continuum of levels of abstraction. Of course, the examples given are not the only ways in which less detailed descriptions could be abstracted step by step.

The point is that the abstractness of a description of something is a relative characteristic at least until further abstraction of the description is not possible. One cannot conclude that, because Description A is an abstraction of Description B, Description A “describes an abstract idea.”

This leaves us with an interesting question: is a claim that describes its subject in a manner that is subject to further abstraction ever directed to an “abstract idea” under Bilski, and if so, under what circumstances? The Bilski court clearly answered this “yes,” but provided little guidance as to the required circumstances.

Note how the process of how to form abstractions described above parallels how a patent attorney typically constructs a broad claim, by reducing the detail in which an embodiment is described until left only with the information relevant to distinguishing the claimed invention from the prior art. The patent law has always allowed a good deal of abstraction in drafting claims without charging the applicant with a violation of 35 USC §101 (subject, of course, to the other requirements for granting a patent).

It has been suggested that Bilski’s claimed invention “was just a couple of levels of abstraction too high to take out of the public domain and give someone a monopoly.” ¹¹Marcus, P. L., “Business Process Patents Little Clearer After Bilski Decision,”http://www.negotiationpro.com/articles/Business%20Process%20Patents%20Little%20Clearer%20After%20Bilski%20Decision.htm If the court is to apply a more dynamic scale of abstractness, some guidelines on how to conduct a level of abstraction analysis will be needed.

Abstraction in Copyright and Patent Law

Copyright law has an “abstractions test” created by Judge Learned Hand. Whereas patent eligibility draws a line between abstract ideas and functional applications of those ideas, copyright eligibility draws a line between functional ideas and creative expressions thereof:

Judge Learned Hand explained the idea-expression dichotomy by means of a less precise “abstractions” test. He stated: “Upon any work … a great number of patterns of increasing generality will fit equally well, as more and more of the incident is left out.” At its most concrete level, a work was protected by copyright; but at some level of abstraction, it became more of an “idea,” to which the protection of copyright did not extend. The abstractions test was significant because copyrighted works were given protection on some level of abstraction, although that protection did not extend to the greatest level of abstraction. Judge Hand’s abstractions test thus has expanded the eligibility for copyright by protecting those works that might be somewhere along the continuum between the expression and the idea of a work. ¹²Samuels, E., “The Idea-Expression Dichotomy in Copyright Law,” 56 Tenn. L. Rev. 321, 325 (1989) (quoting Nichols v. Universal Pictures Corp., 45 F.2d 119, 121, 7 USPQ 84 (2d Cir. 1930)).

Copyright and patent eligibility ¹³It has been suggested that the “abstraction test” of copyright law could be helpful in the case of claim interpretation, which presents a problem different from patent eligibility: “There is nothing ambiguous, vague, incoherent, or even surprising about the patentee trying to move up the abstraction ladder to gain more scope when drafting the claim.” See, Chiang, Tun-Jen, “The Levels of Abstraction Problem in Patent Law” (July 15, 2009); Northwestern University Law Review, forthcoming; George Mason Law & Economics Research Paper No. 09-33. Available at SSRN: http://ssrn.com/abstract=1434465 (at 27; exploring the claiming of ideas at multiple levels of abstraction; at 31.); Marcus, “Business Process Patents,” supra. can be seen as a continuum of abstraction, from detailed expression through functionally applied ideas to fully abstracted concepts such as mathematical formulae. For each, the threshold of possible protection lies “somewhere along” a relevant respective region of the continuum.

Of course, Judge Hand did say, after describing increasing generalizations of a work, that “there is a point in this series of abstractions where they are no longer protected, since otherwise the playwright could prevent the use of his “ideas,” to which, apart from their expression, his property is never extended [citation omitted]. Nobody has ever been able to fix that boundary, and nobody ever can.” ¹⁴Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930). Nevertheless, this approach is often found useful in copyright analyses, and can be applied to both copyright protection and patent eligibility, despite the absence of an absolute boundary.

Creating a ladder of abstractions applicable to an invention should enlighten judges so that their positioning of the threshold in a particular case will be neither too arbitrary (in the extreme, applying a test equivalent to “knowing it when they see it” ¹⁵See, Marcus, supra, referring to obscenity case Jacobellis v. Ohio, 378 U.S. 184 (1964) in characterizing post-Bilski identification of an abstract idea for patent eligibility.), nor too restricted (as a result, for example, of trying to force fit new facts into the framework of some prior decision that was based on its own non-analogous facts). All claim limitations can appear on the ladder.

Thus, this approach also allows a court to follow the Diehr
¹⁶Diamond v. Diehr, 450 US 175, 209 USPQ 1 (1981). court’s “claim as a whole” rule rather than creating litmus tests that require the court to ignore, rather than weigh, certain types of claim elements, such as post-solution steps or computer product preambles.

When Does the Claimed Level of Abstraction Meet Section 101?

In the post-Bilski patent eligibility decisions Research Corp., Ultramercial, ¹⁷ Ultramercial LLC v. Hulu, 657 F.3d 1323, 100 USPQ2d 1140 (2011) (82 PTCJ 689, 9/23/11), vacated and remanded 132 S.Ct. 2431 (2012) (84 PTCJ 136, 5/25/12). and CLS Bank, one can see the Federal Circuit weighing characteristics of the claimed invention. In Research Corp., the court stated:

The Supreme Court did not presume to provide a rigid formula or definition for abstractness. See, e.g., Bilski, 130 S.Ct. at 3236 (The court has “never provide[d] a satisfying account of what constitutes an unpatentable abstract idea.” (Stevens, J., concurring)). Instead, the Supreme Court invited this court to develop “other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” Id. at 3231. ¹⁸Research Corp. at 869.

In the Federal Circuit’s original decision in Ultramercial (now on remand for reconsideration), the court found that that the claimed method was a practical application of the abstract idea of using advertising as a form of currency, and that complex computer programming and use of the internet were required in the claimed method of applying that abstract idea. The court found the claim to be patent eligible—but the court’s decision was not based on a specific test of programming complexity or internet implementation. ¹⁹Ultramercial at 1327-31. The court refused to define “abstract” other than in terms of a general necessary impact measured by the purpose and text of the Patent Act. ²⁰Id.

In CLS Bank, the court found that the claim does not broadly cover a business concept, but covers the practical application of the business concept in a specific way. The court characterized the claim limitations as being integral to the method because they play a significant part in permitting the method to be performed, and noted that these limitations leave room for other applications of the business concept. ²¹CLS Bank, slip op. at 19. The court found no conflict between its approach and that of another panel in CyberSource Corp. v. Retail Decisions Inc., 654 F.3d 1366, 1375, 99 USPQ2d 1690 (Fed. Cir. 2011) (82 PTCJ 528, 8/19/11),although some may read that case as taking a narrower view of patent eligibility. CLS Bank at 21-23.

From these decisions, one can take the Federal Circuit’s reading of the Supreme Court’s invitation to develop criteria not as a directive to draw sharp lines between those types of inventions that are abstract and those that are non-abstract, but as an invitation to assess how a claim describes the level of abstraction of any type of invention, and to make a patent eligibility decision based on the consistency of that level of abstraction with the purpose and text of the Patent Act. The Federal Circuit in these decisions appears to look for a level of abstraction involving an application of a basic concept that does not unduly preempt other applications of the concept.

Moreover, support for a case-by-case examination without preconceived notions of types of ineligible subject matter is found in the Federal Circuit’s decision in Classen, which reads pre-Bilski Supreme Court cases to have:

observed that while the exclusion from patentability of abstract principle and fundamental truth is well established in the common law, the boundary between abstract principle and practical application may vary with the subject matter. ²²Classen, 659 F.3d at 1064 (Emphasis added), citing Chakrabarty and Diehr.

To act case-by-case is consistent with the Supreme Court’s course corrections in other areas of patent law in which the Federal Circuit tried to provide a formulaic test. When dealing with patentable subject matter, the role of levels of abstraction without a bright line test is analogous to the role of degrees of predictability in determining obviousness under KSR.

Charting Levels of Abstraction

The level of abstraction of a claim reflects the degree to which it applies a basic concept and the freedom it allows for alternative applications of the concept.

One way to assess a particular claim’s level of abstraction is to chart the basic concept, the claim requirements, and logically intervening levels of abstraction. This approach (used above in the general discussion of levels of abstraction) provides a good way to appreciate the distance (or lack thereof) between the claim requirements and the basic concept. Take, for example, method Claim 33 ²³33. 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 [sic] 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 one of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions. of the patent (5,970,479) at issue in CLS Bank:

For comparison, the claims at issue in Bilski can be charted as follows:

The Supreme Court characterized the Bilski claims ²⁴The Bilski dependent claims include: Claim 4: The method of claim 3 wherein the fixed price for the consumer transaction is determined by the relationship: Fixed Bill Price = Fi + [(Ci + Ti+ LDi) · (a + +E(Wi)] wherein, Fi = fixed costs in period i; Ci = variable costs in period i; Ti = variable long distance transportation costs in period i; LDi = variable local delivery costs in period i; E(Wi) = estimated location-specific weather indicator in period i; and a and b are constants. Claim 7: The method of claim 4 wherein the energy price is determined by the steps of: (a) Evaluating the usage and all costs for a prospective transaction; (b) Performing a Monte Carlo simulation across all transactions at all locations for a predetermined plurality of years of weather patterns and establishing the payoffs from each transaction under each historical weather pattern; (c) Assuming that the summed payoffs are normally distributed; (d) Performing one-tail tests to determine the marginal likelihood of losing money on the deal and the marginal likelihood of retaining at least the design margin included in the initial evaluation of the fixed bill price; and (e) Adjusting the margin of the fixed bill price if the transaction as initially priced leads to a reduced expected margin or increases the likelihood of a loss until the expected portfolio margin and the likelihood of portfolio loss is acceptable. as “seek[ing] to patent both the concept of hedging risk and the application of that concept to energy markets.” And the court dismissed detailed dependent claims as mere field of use limitations or insignificant post-solution components without discussion of the specific claim elements. ²⁵Bilski, 130 S.Ct. at 3231.

But the dependent claims clearly do not prevent the use of other approaches to hedging risk in energy markets. One can speculate that the Federal Circuit panels who decided Ultramercial and CLS Bank would have passed the narrower Bilski claims on to examination under Section 101.

As the Supreme Court has left such distinctions to a case-by-case analysis, we can expect that small differences in claim language will lead to a wide variation in outcomes within the boundaries outlined by the Supreme Court and by the Federal Circuit in cases like CLS Bank. ²⁶See J. Gleick, Chaos: Making A New Science (1988).

This article has not dealt with laws of nature, the subject of Prometheus Laboratories Inc. v. Mayo Collaborative Services. ²⁷Prometheus Laboratories Inc. v. Mayo Collaborative Services, 132 S.Ct. 2431, 101 USPQ2d 1961 (2012) (83 PTCJ 727, 3/23/12). Perhaps a similar charting of levels of application of a law of nature would be helpful, but that discussion is for another day.