On June 19, 2014, the U.S. Supreme Court issued a unanimous decision in Alice Corp. v. CLS Bank Int’l (Alice)[i]. In Alice, the Court held that several computer-implemented patents were not eligible for patenting under 35 U.S.C. §101 because they were drawn to nothing more than an abstract idea[ii]. In response to the decision, the United States Patent and Trademark Office (USPTO) issued preliminary examination instructions to patent examiners for determining the patent eligibility of computer-implemented inventions involving abstract ideas (Guidelines)[iii].
The above decision and Guidelines provide some guidance on the patent eligibility of computer-implemented inventions that involve abstract ideas. However, their full effect remains to be determined.
The Supreme Court Decision
The patents at issue in Alice related to a computerized platform for eliminating risk in conducting financial transactions between two parties. The platform utilized an escrow as a neutral intermediary. The neutral intermediary ensured that each party met its respective obligations before any obligations were actually exchanged.
The Court held that Alice’s patents were ineligible under 35 U.S.C. §101 because they were “drawn to the abstract idea of intermediated settlement.” In addition, the Court held that the claimed invention merely required a “generic computer implementation” that failed “to transform that abstract idea into a patent-eligible invention.”
In reaching this conclusion, the Court relied on the 35 U.S.C. §101 analytical framework that was outlined in the Court’s prior decision in Mayo v. Prometheus (Mayo) [iv]. In Mayo, the Court asked two questions for determining patent eligibility. First, the Court asked if the invention was directed to any of the judicial exceptions to patent eligibility, such as “abstract ideas,” “laws of nature,” or “natural phenomena.” If so, then the Court asked if the invention contained an “inventive concept” that was sufficient to transform the abstract idea into a patent-eligible invention.
In applying the first prong of the Mayo analytical framework, the Court in Alice reasoned that the ideas of intermediated settlement that were outlined in the claimed invention were abstract ideas because they pertained to prevalent and fundamental economic practices. With respect to the second prong, the Court reasoned that the claimed invention did not contain an “inventive concept” because it was only a mere implementation of an “abstract idea” by “using a general-purpose computer.”
In the Guidelines, the USPTO also followed the analytical framework that was outlined in Mayo and Alice. In particular, the Guidelines indicated that patent examiners can utilize a two-part analysis for evaluating the patent eligibility of abstract ideas. First, examiners must “determine whether the claimed invention is directed to an abstract idea.” Second, if an abstract idea is present, the examiners must determine whether the claimed invention is sufficient to ensure that it amounts to “significantly more than the abstract idea itself.”
First Prong: What is an Abstract Idea?
With respect to the first prong, the Guidelines explained that abstract ideas can include the following: (1) fundamental economic practices; (2) some methods of organizing human activities; (3) an idea itself; and (4) mathematical relationships or formulas.
Second Prong: What is “Significantly More”?
With respect to the second prong, the Guidelines explained that the following aspects of an invention may be “significantly more than the abstract idea itself”: (1) improvements to a technology or technical field; (2) improvements to the functioning of a computer itself; and (3) limitations that link the abstract idea to a particular technological environment.
However, the Guidelines indicated that terms such as “apply it” or equivalent words would not be enough by themselves to add “significantly more” to an abstract idea. Likewise, the Guidelines indicated that claimed inventions that recite “no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry” are not enough to add “significantly more” to an abstract idea.
Where Things Stand
Prior to the issuance of the Supreme Court’s decision in Alice, there were concerns that the decision would completely eliminate software and business methods patents. However, the decision and Guidelines indicate otherwise.
For instance, the Guidelines explicitly state that “Alice Corp. neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.” Moreover, the Guidelines explain that Alice’s patents were held to be patent ineligible because “the generically-recited computers in the claimed invention add nothing of substance to the underlying abstract idea.”
Therefore, it is unlikely that all software, computer-implemented and business method inventions would be affected by the decision and Guidelines. For instance, software inventions that improve the functioning of a computer may still be eligible for patent protection. Likewise, software inventions that improve other technical fields may also be eligible for patent protection.
Nonetheless, the full effect of the decision and Guidelines remains to be determined. For instance, the extent of the application of the Guidelines by the examiners remains to be determined. Moreover, the definition of “abstract ideas” and “significantly more” may be modified or confined by subsequent court decisions or USPTO guidelines.
[i] Alice Corporation Pty. Ltd. v. CLS Bank International, et al., 573 U.S. ___, No. 13-298 (June 19, 2014).
[ii] 35 U.S.C. §101 states that, “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” Judicial exceptions to what constitutes patent eligible subject matter have included “abstract ideas,” “laws of nature,” and “natural phenomena.”
[iii] June 25, 2014 Memorandum issued by Andrew H. Hirshfeid, Deputy Commissioner For Patent Examination Policy, to the Patent Examining Corps, entitled “Preliminary Examination Instructions in view of the Supreme Court Decision in Alice Corporation Ply. Ltd. v. CLS Bank Illternational, et al.” http://www.uspto.gov/patents/announce/alice_pec_25jun2014.pdf
[iv] Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (March 20, 2012)