Alice Corp. V. CLS Bank Int'l Refines Standard for Software Patents


The Supreme Court on June 19, 2014, set forth a new test that refines the standard to patent computer implemented methods.  In Alice Corporation v. CLS Bank International, the patents in issue claimed a method for mitigating risk in financial exchanges.  The patents disclosed a method to facilitate the exchange of financial obligations between two parties using a computer system as a third-party intermediary. The patents claimed (1) a method for exchanging financial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.  The court's decision in Alice establishes a two-step analysis for determining whether a claimed invention meets the threshold for patentability.  First, a court must determine whether the claims are directed to a patent-ineligible concept which, in this case, referenced the abstract idea of intermediated settlements.  The court concluded the "abstract idea" of intermediated settlements is patent ineligible.  If the first prong of the test – patent-ineligibility – is met, the court then must apply the second step of the analysis: whether, when considered as an ordered combination, the recitation of generic computer components add something that is not already present when the steps are considered separately.  The court applied the framework enunciated in its 2012 decision Mayo Collaborative Services v. Prometheus Laboratories and concluded that the claim does no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.  That was not enough to transform the abstract idea into a patent-eligible invention.


The Supreme court's decision provides guidance to the court of Appeals for the Federal Circuit, which reached the same result by applying the Machine-or-Transformation test (MOT).  While acknowledging that MOT is not solely the determining factor for patent eligibility, the Federal Circuit analysis hinged almost exclusively on MOT in reaching the conclusion of patent-ineligibility.  Under Alice, to transform otherwise ineligible subject matter a claim must include "additional features" to ensure that the claim is more than a drafting effort designed to monopolize an abstract idea, i.e., simply reciting a generic computer that does nothing more than perform generic computer functions.  The use of a computer to obtain data, adjust account balances, and issue automated instructions are “well-understood, routine, conventional activities” previously known to the industry, and will not transform an otherwise ineligible claim into a patent-eligible invention.


For software patent applicants, Alice now requires that the method or system 1) improves the functioning of the computer itself, and does more than instruct one to apply the abstract idea on an unspecified generic computer;  or 2) effects an improvement in another technology or field.  Further, courts will look at the substance of the claims, without deference to the form of claim drafting, giving no patentable weight to specific hardware recited in the claim (e.g., data processing system, communications controller, or data storage unit) that offers no meaningful limitation beyond general linking of the use of the method on a computer.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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