Posted:  September 8, 2013

On September 5, 2013, the Federal Circuit affirmed a District court holding that a computer system claim was not patent-eligible under 35 U.S.C. § 101.  In Accenture Global Servs., GmbH v. Guidewire Software, Inc., a divided panel affirmed a District of Delaware decision finding system claims 1-7 of U.S. Patent 7,013,284 not patent-eligible on summary judgment.  (Accenture Global Servs., GmbH v. Guidewire Software, Inc., 800 F. Supp. 2d 613, 621-22 (D.Del. 2011).)  Judge Lourie authored the majority opinion of the panel (Judges Lourie, Reyna, and Rader), and Judge Rader filed a dissenting opinion.

District Court Action Results in Summary Judgment of Invalidity Based on 35 U.S.C. § 101

Accenture sued Guidewire for infringement of the ‘284 patent in late 2007.  In 2011, the District court found claims 1-22 of the ‘284 patent invalid under 35 U.S.C. § 101 on summary judgment.  The District court decided the summary judgment motion after the Federal Circuit and Supreme Court decisions in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)(en banc) aff’d on other grounds sub nom. Bilski v. Kappos, 560 U.S. ____, 130 S. Ct. 3218 (2010).

Federal Circuit Appeal

Accenture appealed the District court determination only as to claims 1–7, directed to a system for generating tasks to be performed in an insurance organization, but did not appeal similar method claims 8–22.  The Federal Circuit affirmed the District court in a 2:1 split panel decision by leveraging the finding of patent ineligibility of method claims 8-22 that were not appealed:

We conclude that the district court’s decision on patent-ineligibility of the system claims must also be affirmed, both because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible and because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster. Although the issue of the patent eligibility of the method claims is not before us, as it has not been appealed, it is plain to us that, as the district court held, those claims are ineligible for patent.

Because the ’284 patent’s method claims have been found to be patent ineligible, we first compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible. CLS Bank, 717 F.3d at 1291. Under this analysis, we compare the two claims to determine what limitations overlap, then identify the system claim’s additional limitations. Essentially, we must determine whether the system claim offers meaningful limitations “beyond generally linking ‘the use of the [method] to a particular technological environment.’” Id. (quoting Bilski, 130 S. Ct. at 3230).

According to the majority, one must consider if the method claims are similar enough to the apparatus claims to warrant a conclusion that the apparatus claims are equally not patent-eligible.

More about the ‘284 Patent

The ‘284 patent claims describe a computer system and method for handling insurance-related tasks.  The Federal Circuit decision summarized the claims as follows:

Claim 1 is a claim to a system for generating tasks to be performed in an insurance organization. The system stores information on insurance transactions in a database. Upon the occurrence of an event, the system determines what tasks need to be accomplished for that transaction and assigns those tasks to various authorized individuals to complete them. In order to accomplish this, the claimed system includes an insurance transaction database, a task library database, a client component for accessing the insurance transaction database, and a server component that interacts with the software components and controls an event processor, which watches for events and sends alerts to a task engine that determines the next tasks to be completed.

Claim 8 claims a method for generating tasks to be performed in an insurance organization. The method takes an insurance transaction and applies rules to that transaction to determine tasks to be completed. These tasks are made accessible to authorized individuals who then complete the task.

The text of claim 1 and claim 8 are provided for comparison:

1.  A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

Claim 8 reads as follows:

8.  An automated method for generating tasks to be performed in an insurance organization, the method comprising:

transmitting information related to an insurance transaction;

determining characteristics of the information related to the insurance transaction;

applying the characteristics of the information related to the insurance transaction to rules to determine a task to be completed, wherein an event processor interacts with an insurance transaction database containing information related to an insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format;

transmitting the determined task to a task assistant accessible by an assigned claim handler, wherein said client component displays the determined task;

allowing an authorized user to edit and perform the determined task and to update the information related to the insurance transaction in accordance with the determined task;

storing the updated information related to the insurance transaction; and

generating a historical record of the completed task.

Federal Circuit Majority Compares Apparatus Claims to Method Claims

The majority compared the method and system claims of the ‘284 patent:

It is not disputed by the parties that the ’284 patent’s system claim 1 includes virtually the same limitations and many of the same software components as the patentineligible method claims. Both claims are for “generating tasks to be performed in an insurance organization.” . . .  Both the claimed system and the claimed method contain an insurance transaction database containing information relating to an insurance transaction “decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format.” . . . Additionally, claim 1 and claim 8 both contain: a client component, . . . a task assistant, . . . and an event processor, . . . . The system claims are simply the method claims implemented on a system for performing the method.

Accenture only points to system claim 1’s inclusion of an insurance claim folder, a task library database, a server component, and a task engine in attempting to show that the system claim is meaningfully different from the ’284 patent’s method claims. However, these software components are all present in the method claims, albeit without a specific reference to those components by name. (underlining added)

The majority decision further determined that the ‘284 patent does not distinguish the system and method claims:

Indeed, even the specification of the ’284 patent makes little distinction between the system and method claims. The patent describes the invention as “[a] computer program . . . for developing component based software capable of handling insurance-related tasks.” Id. col. 3 ll. 23–25. The patent then discloses detailed software descriptions of the various software components without differentiating between the system or method claims. Further, although the patent’s Figure 1 shows a schematic diagram of the invention, one that includes computer hardware, the schematic’s hardware is merely composed of generic computer components that would be present in any general purpose computer. . . .  The patent thus discloses that the representative hardware for the ’284 patent is a generic computer. In fact, other than the preamble to claim 1 stating that it is a system claim, the limitations of system claim 1 recite no specific hardware that differentiates it from method claim 8. Indeed, in this case “[t]he system claims are [akin] to stating the abstract idea [of the method claim] . . . and adding the words: ‘apply it’ on a computer.” CLS Bank, 717 F.3d at 1291 (plurality opinion) (citing Mayo, 132 S. Ct. at 1294).

Because the system claim and method claim contain only “minor differences in terminology [but] require performance of the same basic process,” id. at 1291, they should rise or fall together. Accenture only cited four additional limitations in system claim 1, and we have already indicated why those limitations do not meaningfully distinguish the abstract idea over the patent ineligible method claim. While it is not always true that related system claims are patent-ineligible because similar method claims are, when they exist in the same patent and are shown to contain insignificant meaningful limitations, the conclusion of ineligibility is inescapable. Thus, like the unappealed method claims, the system claims of the ’284 patent are invalid under 35 U.S.C. § 101.

Federal Circuit Majority Reviews the System Claims “On Their Own”

The majority decision included a separate section to analyze the claims on their own, stating that the system claims are ineligible for patenting because they fail to include limitations that set them apart from the abstract idea of handling insurance-related information.  The majoried identified this “abstract idea” of the claim:

The abstract idea at the heart of system claim 1 of the ’284 patent is “generating tasks [based on] rules . . . to be completed upon the occurrence of an event.” ’284 patent col. 107 ll. 25, 38–39. Although not as broad as the district court’s abstract idea of organizing data, it is nonetheless an abstract concept. Having identified the abstract idea of the claim, we proceed with a preemption analysis to determine whether “additional substantive limitations . . . narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” CLS Bank, 717 F.3d at 1282 (citing Mayo, 132 S. Ct. at 1300; Bilski, 130 S. Ct. at 3231; Diamond v. Diehr, 450 U.S. at 187); see also Ultramercial, 2013 WL 3111303, at *8 (“[T]he relevant inquiry is whether a claim, as a whole, includes meaningful limitations restricting it to an application, rather than merely an abstract idea.” (citing Prometheus, 132 S. Ct. at 1297)).

The majority decided that Accenture’s position (that the claim is limited by being applied in a computer environment and within the insurance industry) was not sufficient to adequately “narrow, confine, or otherwise tie down the claim,” citing Bilski, Diamond v. Diehr, and Parker v. Flook. The decision noted that the specification was complex, but deemed the claims to recite only “generalized software components arranged to implement an abstract concept on a computer.”

Federal Circuit Majority Compares the ‘284 Patent Claims to the Ultramercial Claims

The majority differentiated claim 1 of the ‘284 patent from the claims in the Ultramercial patent (which were found to be patent-eligible by the Federal Circuit panel only recently) by finding that claim 1 is more abstract than the claims upheld in Ultramercial.  Furthermore, the majority found that the instant case raise different procedural issues than the Ultramercial case, because in Ultramercial the claims had not been interpreted and were the subject of dismissal on a 12(b)(6) preanswer motion to dismiss.

Judge Rader Dissents

Judge Rader’s dissent made the following points:

• Judge Rader cited his decision in Ultramercial, Inc. v. Hulu, LLC, 2010-1544, 2013 WL 3111303 at *8 (Fed. Cir. June 21, 2013) for the proposition that (1) any claim can be simplified to an abstract idea if stripped of its concrete and tangible limitations, and (2) it is not proper for a court to go hunting for abstractions by ignoring claimed concrete and tangible limitations.
• He disagreed with the majority’s characterization and use of CLS Bank, stating: “[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent. The court’s focus should be on Supreme Court precedent and precedent from this court.”
• He disagreed with the majority’s position that Accenture’s failure to appeal the finding of invalidity of the method claims estopped it from arguing that the elements therein are directed to patent-eligible subject matter.
• He countered the logic set forth by the majority that the invalidity of the method claims urged similar invalidity of system claims by citing an excerpt from the CLS Bank decision.  That excerpt stated that just because one or more method claims was invalid under § 101, that does not dictate that all associated system claims must be likewise invalid.
• Judge Rader would have held that the specific combination of computer components rendered the claim patent-eligible under § 101.

The dissent recalled an earlier quote by the Court prior to grant of en banc review of CLS Bank:  “[N]o one understands what makes an idea abstract.”  Judge Rader finished by reiterating his view that the statute should be consulted, which offers broad categories of patent-eligible subject matter.

Observations

It seems that the Federal Circuit could not be more divided on the subject of patent eligibility than it is today.  As long as the basics of patent-eligibility remain uncertain parties will have less knowledge about the strength of their patents and will expend a lot of resources posturing and briefing on these issues.  That will impact the resources of the courts.  Regardless of your position on patents and patent-eligibility, I think we all agree that what is needed is a patent system that is as uniform, fair, and predictable as possible.  It will be interesting to see if the Supreme Court is going to take this opportunity to again weigh in on patent-eligibility.