The Federal Circuit Dumps Diehr and Broadens Alice

Court of Appeals for the Federal Circuit

“The Federal Circuit then doubles down on its Diehr-defying analysis with a reckless misquote of Alice.”


Matt Delgiorno by: Matt DelGiorno | October 31, 2017

In its recent Smart Sys. Innovations, LLC v Chi. Transit Auth. (Oct. 18, 2017) decision, the Federal Circuit considered an invention allowing accessing to a mass transit system without using a dedicated fare card. Getting rid of one of too many cards in my wallet? Sign me up. I’m glad our patent system incentivizes this kind of innovation. I’d love to leave the house with nothing more than my phone one day.

Oh, wait. Nope. The Federal Circuit threw the claims out under 35 U.S.C. § 101 as directed to an “abstract idea.”

(Pause here) The judicially-created exception to patenting abstract ideas is a dangerous one because, as the Supreme Court has said, “at some level” all inventions “embody, use, reflect, rest upon, or apply” abstract ideas. Alice Corp. Pty Ltd. V. CLS Bank International, 134 S. Ct. 2347, 2354 (2014). That’s why they “tread carefully in construing this exclusionary principle lest it swallow all of patent law.” Id. And it’s also why for decades courts rarely invoked the abstract idea exception, steering clear of that slippery slope in favor or more well-defined aspects of patent law (§§ 102, 103, 112, etc.). We could have, and should have, continued that course. But for the fact that the Federal Circuit seems perfectly content to dive headlong down the slope, swallowing patent law as it goes.

(Resume) To find claims directed to accessing a mass transit system ineligible for patenting requires some pretty remarkable contortions, and (in that regard at least) the Federal Circuit does not disappoint. They begin by summarizing the claim as only “the collection, storage, and recognition of data.” Slip Op., p. 14. But the claim is, on its face, more than that. It is directed to validating entry into “a first transit system” and contains a step of denying access to that system. The Federal Circuit dismisses such claim elements as an inconsequential limitation to a particular “field of use.” Id., p. 15-16.

That analysis cannot be reconciled with the claim the Supreme Court found eligible in Diamond v. Diehr, 450 U.S. 175 (1981). In Diehr, the inventor used a computer to figure out when a press should be opened. The claim (claim 1) had six steps directed purely to computer operations – receiving data, accessing stored data, and performing calculations. It concluded with a final step of opening the press if the calculations panned out. The Smart Systems claim is indistinguishable. It contains five computer operations steps and concludes with a final step of “denying access” if the calculations don’t pan out. It is as improper in Smart Systems as it would have been in Diehr to dismiss physical limitations as a mere “field of use” and throw out the balance of the claim as directed to generic computer operations.

The Federal Circuit then doubles down on its Diehr-defying analysis with a reckless misquote of Alice:

Indeed, that the steps recited in the Asserted Claims are “necessarily” performed “in the physical, rather than purely conceptual, realm . . . is beside the point.” Alice, 134 S. Ct. at 2358 (internal quotation marks and citation omitted).

Slip Op., p. 16. What the Supreme Court actually said was: “The fact that a computer ‘necessarily exist[s] in the physical, rather than purely conceptual realm … is beside the point.’” Alice, 134 S. Ct. at 2358 (emphasis added). The Supreme Court did not want an inventor to be able to claim a “principal of the physical or social sciences” simply by adding a concrete “computer system.” Id. Those are not the facts of Smart Systems case. Smart Systems did not claim a “principal of the physical or social sciences.” And they did not point to the computer limitations as a hook into the physical realm – they pointed to the mass transit system the claimed invention was providing access to. Slip Op., p. 16. Again, if the Federal Circuit’s rewrite of Alice was the law, Diehr could not stand. We would simply dismiss the physical existence of the press as “beside the point.”

With an exception like this one that is judicially-created, precedent is important. There is no statutory language or legislative history to fall back on. And with an exception like this one that has the potential to swallow all of patent law, restraint is important. Stretching precedent takes dangerous steps down the slippery slope. The Federal Circuit must do a better job of applying Supreme Court cases and heeding its warnings.

In the meantime I’ll keep a new wallet on my Christmas list.

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