In a long-awaited, patent-law ruling involving a computer-implemented system, the Supreme Court in Alice Corp. v. CLS Bank Int’l, No. 13–298, 2014 WL 2765283  (U.S. June 19, 2014) unanimously affirmed that the claims in that case were not eligible for patent protection under 35 U.S.C. Section 101, holding that they were drawn to the abstract idea of intermediated settlement. The Court went on to rule that, whether the claims were to a method, system, or computer-readable medium, merely requiring generic computer implementation fails to transform an abstract idea into a patent-eligible invention.

The Supreme Court had previously held that a patent is improperly directed to an abstract idea or law of nature – and therefore invalid – when the patent seeks to broadly preempt the use of an abstract idea or law of nature itself. (Bilski v. Kappos, 561 U.S. 593 [2010]). This test has been described as the “preemption test” for deciding when a patent falls within the abstract idea exception to patentability. The Court ruled, however, that solely looking at the preemptive effect of a patent is not enough.

The Court acknowledged that, at some level, patents embody some type of abstract idea and therefore preempt some uses of an abstract idea. Thus, the Court stressed the importance of using an analytical framework that distinguishes between patents that are directed towards an abstract idea and patents that integrate abstract ideas “into something more.” 

The Abstract Idea Test

The Court then reasserted the abstract idea test it set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1292, 182 L. Ed. 2d 321 (2012) for determining whether a patent falls into the “abstract idea” exception and is invalid. First, it must be determined whether the patent claims at issue are directed towards laws of nature, natural phenomena, and abstract ideas. To answer that question, courts must ask the question “what else is there in the claims before [them]?” The second step in this test is 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.”

Using this analytical framework, the Court first ruled that Alice Corp.’s patents were directed towards an abstract idea and thus met the first part of the abstract idea test. The Court reasoned that Alice Corp.’s patents were directed towards the abstract idea of intermediated settlement and likened Alice Corp.’s patents to the patents the Supreme Court ruled were invalid in Bilski, which dealt with a computer program that hedged risk in financial transactions. The Court reasoned “[l]ike the risk hedging in Bilski, the concept of intermediated settlement is ‘a fundamental economic practice long prevalent in our system of commerce.’” The Court, however, declined to set forth “the precise contours” of what constitutes an abstract idea and reasoned that the case’s factual similarity to Bilski was enough to find that the patents at issue were directed towards an abstract idea. 

The Court then moved to the second part of the abstract idea test and ruled that Alice Corp.’s patents did not contain an inventive concept sufficient to transform the abstract idea of intermediated settlement into a patent-eligible application. The Court held that the mere introduction of a computer into a patent that recites an abstract idea or law of nature and then tells a computer to apply that idea is not an inventive concept sufficient to transform an abstract idea into a patent-eligible application. Additionally, for an invention to be an “inventive concept," it must improve an existing technological process rather than use computers in a conventional, well-known way. The Court ruled that Alice Corp.’s method claims merely recited the concept of intermediated settlement as performed by a generic computer and, therefore, did not do anything more than recite an abstract idea and tell a computer to apply that idea. The Court ruled that Alice Corp.’s system claims likewise failed because they merely recited generic computer components together with an abstract idea. The Court ruled that to pass the second prong of its test and avoid being deemed an abstract idea, a patent reciting a hardware component must offer a meaningful limitation beyond generally linking the use of an abstract idea to a computer implementation or a particular technological environment. Here, the claims did nothing to improve the technology or technical field itself, but combined formulas and computer technology that were well-known and already widely used.

Justice Sotomayor wrote a separate concurring opinion joined by Justices Ginsburg and Breyer to add that she adheres to the view that any claim that merely describes a method of doing business is not patentable under 35 U.S.C. § 101. While not part of the Opinion of the Court, this concurrence may well act to chill obtaining or enforcement of business method patents.

Implications of the Supreme Court’s Ruling

The Court’s ruling declined to provide a definitive test that delineates the contours of an abstract idea from a patent-eligible claim. Instead, the second part of the Court’s two-part analysis, looking for “something more” than an abstract idea in the language of the claim, is likely to mean that, as the Federal Circuit has noted before, “the name of the game is the claim.” (Hilton Davis v. Warner-Jenkinson Co., 62 F.3d 1512, 1539 (Fed. Cir. 1995) (Plager, J., with whom Archer, C.J., and Rich & Lourie, JJ., join, dissenting) Practitioners are thus well-advised to consider a varied program of claims, with different approaches to adding the “something more,” with the expectation that these limitations could be the subject of intense scrutiny, either by the USPTO during the patenting process or in any subsequent enforcement or licensing of the resultant patent. 

Topics:  Alice Corporation, CLS Bank, CLS Bank v Alice Corp, Mayo v. Prometheus, Patent Litigation, Patent-Eligible Subject Matter, Patents, Risk Mitigation, SCOTUS, Software

Published In: Civil Procedure Updates, Intellectual Property Updates, Science, Computers & Technology Updates

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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