State of Innovation

Patents and Innovation Economics

Alice Corp v. CLS Bank: Brief in Opposition to Certiorari

CLS Bank filed their brief in opposition to the Writ of Certiorari on November 6, 2013.  Some people use words to understand the world and some people use words to manipulate other people.  CLS’s brief falls into the second category.  The brief can only be described as a dishonest mish mash of ideas that are often illogical, contradictory, and outright lies.  On the merits of the Writ it is clear that the courts do not have a consistent standard for 35 USC 101, particularly with respect to software enabled inventions and so called business method inventions.  Note that almost every invention is a business method invention because people want to commercialize their inventions, so they are part of a business.  The first patent ever issued in the US was a method of making pot ash, which is a business and a method of operating that business.

The fault for this confusion is not the Court of Appeals for the Federal Circuit, but the Supreme Court who refuses to define its terms, refuses to follow the statute, refuses to listen to people who know infinitely more about patent law than any of the Supreme Court Justices will ever know, and refused to create a logical framework.  As a result, I am sure that the Supreme Court will only make a further mess of this area, so I cannot root for the Supreme Court to grant cert.

Because this brief is so incoherent I will only discuss some of the lowlights of the brief.

*Not surprisingly the Attorney for CLS Bank is not a registered patent attorney and does not have a degree in engineering or science.  His co-counsels do include one registered patent attorney, Brian M. Burocker, who has only prosecuted one issued patent.


*Question Presented:

Absent an inventive concept, a method of performing well-understood economic activity is not patent-eligible under 35 U.S.C. § 101. P. 2

The method, media, and system claims asserted here “simply recite how an electronic intermediary can be used to effectuate an almost infinite array of exchanges in the modern financial world” and, accordingly, would “effectively preempt the use of an electronic intermediary to guarantee exchanges across an incredible swath of the economic sector.”  P. 2

First of all the patent statutes do not discuss an inventive concept.  Second of all, the phrase ‘inventive concept’ is not defined in the brief, statute, regulations, or by the Supreme Court or any other US court.  This is first substantive part of the brief and it is complete nonsense.  In any rational world these attorneys would be unemployed and unemployable, but because we have a number of Supreme Court Justices who have no interest in following the law, logic, or reason.  As a result, this sort of B.S. is not only condoned but applauded.

The preemption argument is wrong – logical, legally, and factually.  First of all the whole point of property law, which includes patents, is to preempt or give exclusive rights to the property owner.  Second of all the claims are actually very specific, but I doubt any of the attorneys who wrote this brief can properly construe the claims of a patent.  Third almost all software escrow agreements have an ‘electronic intermediary’ that guarantees an exchange.  So this statement is blatantly false.


*The district court held that all of the asserted claims are patent-ineligible under 35 U.S.C. § 101 because they impermissibly attempt to monopolize the core economic idea of intermediated settlement, or escrow. P. 9

This would be a good time to define escrow.  “Escrow means Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.”  Based on this definition Alice’s does not even claim an escrow system.  But logic and definitions as I stated at the beginning are irrelevant to the attorneys who wrote this brief.

There is no such thing as a patent monopolizing anything.  A patent is a property right.  The essence of a property right is to exclude others.  For more information on the nonsense that patents are monopolies see:

Patents: Monopoly or Property Right a Testable Hypothesis

If patents are a monopoly, as some suggest, then it should led to certain outcomes.  A close examination shows that none of the supposed monopoly effects result from granting patents.


Monopoly/Rent Seeking vs. Property Rights/Intellectual Property

This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference.  Patents fit all the characteristics of a property right and none of a monopoly.  Note that professional licenses, such as a law license has some of the characteristics of a monopoly.


More on the Myth that Patents are Monopolies

This post contains a number of quotes from philosophers explaining that patents are not monopolies.


Property Rights, Possession and Objects

This post explains the difference in the concepts of property rights, possession, and objects.  Most economists and patent detractors confuse these concepts.  The origin, definition, and legal basis of property right are explained.


The Myth That Patents are a Monopoly

This post compares the definition of a monopoly to the rights obtained with a patent.  It shows that the rights obtained with a patent do not confer a monopoly.


*Each additional element is examined to see if it is “sufficient to transform the nature of the claim” and then all elements must be considered together “as an ordered combination.” P. 12

A court following the methodology articulated in Mayo thus considers the claims “as a whole” (ibid.) and does not inappropriately “dissect the claims into old and new elements and then … ignore the presence of the old elements in the analysis.” Diehr, 450 U.S. at 188.  P. 12

35 USC 103 requires examining the invention (claim) as a whole.  This statement clearly violates the Statute.  But they state that is not what they are doing, so it must be so. (Using words as tools of manipulation, not logic.)


*Accordingly, the “bright-line prohibition against patenting” abstract ideas cannot be drafted around by adding routine elements, by limiting the claim to a particular technological environment, or by rephrasing it to cover the same scope by tricks such as breaking the claim into steps. P. 12

This Court’s “cases warn us against interpreting patent statutes in ways that make patent eligibility depend simply on the draftsman’s art.” P. 26

Now this points out one of the inherent contradictions of the court cases in this area.  If the above statement is true, then why are the courts examining the claims for determining if the invention meets 35 USC 101.  In fact, this is exactly what I have argued in the post Is 35 USC 101 Judged by the Claims?   But you cannot logically state that we examine the claims to determine if the invention meets 35 USC 101 and then state that how the claims are drafted is irrelevant.  This is just an excuse for the judges to make a decision without any logical justification.  The statement of breaking the claims into steps should get the Supreme Court Justices impeached for gross ignorance of the law.


*Where the patent claims an abstract idea and the additional elements “consist of well-understood, routine, conventional activity already engaged in by the scientific community” such that those elements, “when viewed as a whole, add nothing significant beyond the sum of their parts taken separately,” then the claim is ineligible. P.12

Here they try to cover up that they are suggesting dissecting the claims to determine whether it meets 35 USC 101, but if you read it carefully you see that the statement is contradictory on its face.

Now would be a good time to define what an ‘abstract idea’ is, which the courts have failed to do.  Some of the potential definitions of “Abstract” from are provided below:

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.

Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  None of the judges using the “Abstract Idea” standard have bothered to define what they mean by these words.  In the broadest sense of the word, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.  Not defining your terms leads to an Alice in Wonderland world, where words mean whatever the person using them wants them to mean and the reader/listener has no idea what they are talking about.  Failure to define one’s term is the province of charlatans.

If we use the definition of an Abstract Idea given above “a thought or conception that is separate from concrete existence or not applied to the practical”, then every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  The ABSTRACT IDEA exclusion to 35 USC 101 should be dropped, because any logical definition of an abstract idea is excluded by 35 USC 112, first paragraph.  It should also be dropped, because, Judges should not read into statutes things that are not there.

A truly Abstract Idea is not a “process, machine, manufacture, or composition of matter” under 35 USC 101.  The Court need proceed no farther.  But the real thrust behind the Abstract Idea exclusion is to provide a broad (arbitrary) basis for Judges who do not like patents or do not like software patents or patents directed to financial transactions or directed to medical technology to rule patents invalid.  This turns patent law into nothing more than glorified politics.  It is a shameful act by a bunch of charlatans and they are getting away with it, because litigants have not demanded terms be defined.

A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.

This would also be the time to show that money is not abstract.  Money represents units of computers, or ICs, or gasoline and these items are consumed, moved, and assembled based on these transactions.  An analogy to patents on error correction codes or encryption schemes, where the final product is just electronic data might also help.  For more information see Is Money an Abstract Idea? 


*In addition to this judgment order, members of the en banc court also issued six separate opinions, none of which commanded a majority.  P.17

This pretty much defines the situation where cert should be granted.


*Even if the patentee has recited an “important and useful” advancement, the patent will not clear the Section 101 threshold without “an act of invention.” Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2117 (2013).  P. 23

Here we again see language that is nowhere in the statute, “an act of invention”, that is also completely undefined.  Both the attorneys and the judges who used this language should be barred from ever being involved in another patent case.


*But while generic computers are useful tools in the modern workplace and laboratory, they are ubiquitous; reciting them in a patent claim (without more) adds no more to patent-eligibility than reciting the use of a slide rule or protractor or sextant or any other conventional implement of the relevant art.  P. 24

This shows a complete lack of understanding of computers.


*[Alice] argued that its “computer system claims are patent eligible because they claim tangible machines, irrespective of what the computer is configured to do” (id. at 35 (emphasis added)). At that level of generality, Alice has to be wrong: Otherwise every abstract idea could be patented by the trivial expedient of coupling the idea with generic computing devices in the claims. p. 27

This shows that these attorneys have no idea how a computer works or what an abstract idea is.  A computer is a machine (electronic circuit) PERIOD – therefore it meets 35 USC 101 PERIOD.


*The judgments here advance the constitutionally grounded policy concerns underlying Section 101: ensuring that a patentee cannot preclude an entire realm of future innovation while contributing very little to the development of those inventions. P. 28

There is no such Constitutional policy.  The Constitution talks about protecting the Rights of Inventors to their Inventions and does not say anything about precluding innovation.  This B.S. argument is based on the phrase in the Constitution ‘promoting science and the useful arts’.  First, this is a preamble and not a limitation.  It states what the outcome will be of protecting inventors’ rights.  All macroeconomic evidence shows this is exactly what a patent system does.  The B.S. of this argument can be seen in the fact that no one suggests that copyrights should only be awarded if they promoting science and the useful arts.  If that were the case on an individual basis, then most books, TV shows, and movies would not receive copyright protection.


*The Brief quotes Mark Lemley, who is not a patent attorney, does not have a engineering or science background, knows nothing about computers or how they work and can only be considered a charlatan.

“As this Court has summarized, Section 112 does not address the risk that underlies the eligibility exception, namely the risk that a patent on the law would significantly impede future innovation.”  Quoting Mark Lemley who has been shown to be a fraud, is not a patent attorney, is not economist and provides no empirical basis for this conclusion.


November 12, 2013 - Posted by | -Law, News, Patents | ,


  1. Dale,
    What’s the point of arguing with lowlights?
    They will simply drag you down to their subterranean world of total ignorance and there they will have the advantage (to paraphrase Mark Twain) because they are master craftsmen in the art of total ignorance.

    Comment by step back | November 13, 2013 | Reply

  2. Good point, but there were no highlights

    Comment by dbhalling | November 13, 2013 | Reply

  3. Have you seen this recent editorial:
    Promoting American Innovation and Competition:

    Comment by step back | November 14, 2013 | Reply

    • Yes, I have seen that. He also pushed the AIA and I doubt he has any idea what the affects of these pieces of legislation will be. Or he is just getting large campaign donations to push this.

      Comment by dbhalling | November 14, 2013 | Reply

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