US Supreme Court Issues Modest Ruling in ‘Software Patent’ Case

What you need to know:

Thursday’s highly anticipated US Supreme Court ruling in Alice Corp. v. CLS Bank was modest in scope and largely stuck to the tests it previously applied in Bilksi and Mayo for patent eligible subject matter.  The Court ruled that an abstract idea is not eligible for patent protection simply because it is implemented using a computer.

What you need to do:

This ruling will likely not change recommended strategy for companies affected by patents on computer-implemented inventions (‘software patents’).  However, the ruling does provide some additional guidance in deciding whether a given ‘software patent’ is directed to patent eligible subject matter.

In Alice Corp. v. CLS Bank, the US Supreme Court found that patent claims on a computer-implemented method of performing intermediated settlement are directed to patent-ineligible subject matter and are, therefore, invalid.

The Court found that the concept of intermediated settlement is a fundamental economic practice long prevalent in our system of commerce, and that simply implementing this concept with a computer does not make the subject matter patent eligible.

The case provides some clarity regarding what constitutes an un-patentable “abstract idea” and what is a patentable application of an abstract idea.  The Court clarified that “abstract ideas” include long-standing economic and commercial practices, and not just “laws of nature” or “pre-existing fundamental truths.”

The case confirms that recitation of conventional steps performed by a computer – such as calculation, data storage and data transmission – is not sufficient, on its own, to make a claimed abstract idea patent-eligible.

The Court voiced concern in going too far in construing the abstract idea exclusion “lest it swallow all of patent law.”   

The Court applied the two-part test it presented in Mayo for determining patent eligibility under 35 U.S.C. 101:

  • First, determine whether the patent claim at issue is directed to a patent-ineligible law of nature, natural phenomena or abstract idea; and
  • Second, determine whether there is an “inventive concept” recited in the claim that transforms the nature of the claim into a patent-eligible application of the law of nature, natural phenomena, or abstract idea, “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”

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