Thoughts on Alice Corp. v. CLS Bank Int'l

Supreme Court Building #1There's an old saying that "bad facts make bad law," acknowledging that a court's decision regarding an extreme case can result in law that poorly serves less extreme cases.  The Supreme Court's recent trio of 35 U.S.C. § 101 decisions, Bilski v. Kappos, Mayo Collaborative Services v. Prometheus Laboratories, Inc., and today's unanimous Alice Corp. v. CLS Bank Int'l each involved claims that were probably too broad for their own good.  But instead of directly challenging the novelty or non-obviousness of these claims, the patent-eligibility of the claims were the core of the respective disputes.  As a result, the lines between §§ 101, 102, and 103 have become blurred, and the Court still hasn't clarified what makes a claim too abstract to be patent-eligible.  The impact of this decision on less extreme cases -- those with more focused claims for instance -- remains to be seen.

As noted in an earlier overview article by Kevin Noonan, the Court did not bar software or business method patents per se.  This case, however, continues the trend of two other patent cases decided this term, Limelight Networks, Inc. v. Akamai Technologies, Inc. and Nautilus, Inc. v. Biosig Instruments, Inc., in which the Court has placed further limits on the scope of patent protection.  Consequently, the Court has introduced new avenues for challenging the validity of patents.

The following is a collection of initial thoughts regarding the CLS Bank decision and its impact on software and business method practice.

• The Court declined to clearly define the term "abstract idea."  It stated that "we need not labor to delimit the precise contours of the 'abstract ideas' category in this case."  Instead, the Justices relied on the conceptual similarity between Alice's claims and those found patent-ineligible in Bilski.  Alice argued that abstract ideas must exist apart from any human interaction (e.g., an equation would be an abstract idea, but a process involving human activity would not).  The Court would hear nothing of this, again couching the abstract claims of Bilski as "a method of organizing human activity."

• In Bilski, the Court held that "while the machine-or-transformation test has always been a 'useful and important clue,' it has never been the 'sole test' for determining patentability."  In this case, Alice's computer-readable media and system claims were struck down under § 101.  Thus, it appears that to pass the machine-or-transformation test, claims must be tied to a particular machine and not just a generic computer.

• To that point, the Court has taken a rather dim view of the ability of general purpose computing to lift an otherwise abstract idea above the § 101 bar.  For instance, the Court stated that "method claims, which merely require generic computer implementation, fail to transform [an] abstract idea into a patent-eligible invention," "[t]he fact that a computer necessarily exist[s] in the physical, rather than purely conceptual, realm is beside the point," "each step [of Alice's claims] does no more than require a generic computer to perform generic computer functions," and "nearly every computer will include a 'communications controller' and 'data storage unit' capable of performing the basic calculation, storage, and transmission functions required by the method claims."  It is now abundantly clear that recitation of generic computer structure will not save a claim that is drawn to an abstract idea.

• 1980's Diamond v. Diehr noted that "[t]he question therefore of whether a particular invention is novel is wholly apart from whether the invention falls into a category of statutory subject matter."  After today, it appears as if novelty (or lack thereof) can play a major role in determining whether claims are statutory under § 101.  In finding Alice's claims drawn to the abstract idea of "intermediated settlement," the Court cited several references (some of which might not qualify as prior art under §§ 102 or 103) to establish that such undertakings were "fundamental economic practice long prevalent in our system of commerce."  Similarly, when considering the impact of the recited (or stipulated) computer implementation, the Court stated that "all of these computer functions are well-understood, routine, conventional activities previously known to the industry."

• Justice Breyer's two step test for § 101 worthiness introduced in Mayo was thought by some to be an aberration or a temporary departure from the Court's previous holdings.  Others criticized it as being subjective and too difficult to apply in practice -- the test certainly divided the Federal Circuit judges.  With the Justices relying on the test, it is now evident that the Mayo framework was no passing fad.

• The first prong of the Mayo test is to "identify the abstract idea represented in the claim."  In doing so, the Court did not focus on the language of the claims, but instead focused on a summary of the claimed invention.  But almost any invention can be made to look abstract or conventional through summarization, or by downplaying certain aspects of the claim.

• The second prong of the Mayo test is to determine whether a claim directed to an abstract idea recites "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."  But we have little guidance as to what "significantly more" entails.  The only example in the last 40 years of a claim meeting the § 101 bar in the Supreme Court is that of Diehr.

• The Court seems to use the word "technological" as something of a synonym for "physical."  Thus, novel and non-obvious algorithmic improvements might not be patent-eligible unless they are integrated somehow with a physical process.  For instance, the Court wrote that "the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer."  This fixation on physicality may demonstrate an underlying predisposition against software, which is technology that operates in a mostly unseen fashion.

Alice's claims could have, and probably should have, been attacked as being anticipated or obvious.  After all, this decision relies on the existence of prior art that could have been used for such a purpose.  Instead, the Court has fully opened the § 101 Pandora's Box that it peeked into with Mayo.


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McDonnell Boehnen Hulbert & Berghoff LLP on:

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