In a unanimous decision on June 19, 2014 authored by Justice Thomas, the Supreme Court in Alice Corp. v. CLS Bank Intl. held that an abstract idea did not become patent-eligible simply by performing that idea on a computer. In doing so, the Court held that to convert an unpatentable abstract idea or natural law into a patent-eligible invention required application of that abstract idea or natural law in an inventive manner. Generically using a computer for such application was not inventive. This principle applied irrespective of whether the claims were method claims, system claims, or computer-readable media claims.
The invention was in essence a way of using “shadow credit” and “shadow debit” records as means for using a third party intermediary to mitigate risks in transactions, i.e., a form of escrow. The patent contained method claims, system claims and computer-readable media claims. Although not all of the method claims received the use of a computer, the parties had stipulated that a computer was required to perform the method.
Following a majority decision of a panel of the Federal Circuit Court of Appeals upholding the claims on the basis that the detailed requirements of the claims meant that they claimed more than an abstract idea, the Federal Circuit reheard the case en banc and while reversing the panel decision, did so for a variety of reasons such that there was no majority decision in the court. The essential divisions in the Federal Circuit were on how to apply the Supreme Court’s decision in Mayo v. Prometheus which had held that the judicially-created exception to patent protection for natural laws and abstract ideas extended beyond the natural law or abstract idea itself and required something extra in the claim so that the claim did not simply cover or “pre-empt” all applications of the natural law or abstract idea — an inquiry that has come to be known as a “preemption analysis.”
One group of judges in the Federal Circuit, in an opinion by Judge Lourie, saw the requirement for something extra in a method claim that limits the claim over its preempting a natural law or abstract idea as needing to relate to “a product of human ingenuity”. A requirement for computer implementation of a method could be a meaningful limitation if use of the computer was essential to being able to carry out the method or improved computer technology was involved, which is not the case here.
Another group of judges, in an opinion authored by then Chief Judge Rader, took exception to Judge Lourie’s reference to a need for human ingenuity in the additional steps required and took the view that what the Supreme Court meant by its statement that claims should not just take a natural law and say “apply it” was that the additional steps go beyond what would necessarily be done by anyone wanting to use the natural law or abstract idea. A requirement to use a computer could be sufficient to achieve this, even if it just speeded up the method. In the present case, however, the requirement for use of a computer in the method did not achieve this. They also disagreed on whether claims to a computer-based system claim for implementing a method necessarily stood or fell with the method claims.
The Supreme Court granted certiorari.
The Supreme Court’s Decision
The Mayo Framework
Thomas J noted that the framework set out in Mayo v. Prometheus requires a two-step analysis. First, it must be determined whether the claims “are directed to” a law of nature, natural phenomenon, or abstract idea. If so, the second step requires
a search for an “inventive concept”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”
As to the first step, after noting that in Bilski v. Kappos the Supreme Court had held claims to a method of risk hedging as being directed to an abstract idea, Thomas J noted
Like the risk hedging in Bilski, the concept of intermediated settlement [claimed in the present case] is “a fundamental economic practice long prevalent in our system of commerce.”
It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.
This being the case, he noted “we need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case”. Interestingly, although supposedly dealing with patent eligibility rather than novelty or obviousness, the fact that intermediated settlement was “long prevalent in our system of commerce” seems to have been an element in deciding that the idea underlying the claimed invention was an abstract one.
After noting that the purpose of requiring some additional limitation on the application of a natural law or abstract idea was necessary to define a patent-eligible invention was required to make sure that “the [claim] is more than a drafting effort designed to monopolize the” natural law or abstract idea, Thomas J went on to reiterate what was said in Mayo:
“Simply appending conventional steps, specified at a high level of generality,” was not “enough” to supply an “inventive concept”
such as would convert a patent-ineligible natural law or abstract idea into a patent-eligible invention.
In the present case, “the introduction of a computer into the claims does not alter the analysis at Mayo step two.” Thus
Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional feature” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.
This conclusion was reached irrespective of whether one looked at each step of the method claim separately or as an ordered combination of steps.
Consequently, Thomas J concluded his analysis of the method claims:
the relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. They do not.
As to the system claims,
the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] … against” interpreting [the statute] “in ways that make patent eligibility ‘depend simply on the draftsman’s art’” …. Holding that the system claims are patent eligible would have exactly that result.
Therefore, these were also not eligible for patent protection.
The result is not surprising, although there may be some comfort in the holding that there is no general prohibition on software-related inventions. It is, however, disappointing that beyond recognizing that the term “abstract idea” has a special meaning in Supreme Court jurisprudence on patent eligibility, the Court gave no further guidance as to what it meant. There is also little real guidance as to what exactly is required as the “something extra” that would convert an abstract idea or natural law into a patent-eligible invention. Simply stating that carrying out a method on a generic computer or creating a system using generic computer components does not meet the test is something that few would disagree with. The use of the words “inventive concept” to describe the “something extra” does, however, indicate that the Supreme Court has in mind a test more similar to that postulated by Judge Lourie in the Federal Circuit than that proposed by Judge Rader and that there needs to be something specific about the “something extra” that is tied to a particular application of the natural law or abstract idea for this to result in a patent-eligible invention.