Software Patentability – The Supreme Court Speaks. Turn Down the Volume

by Downs Rachlin Martin PLLC

On Thursday, June 19, 2014, the US Supreme Court issued its decision in Alice v CLS Bank, a court case dealing with the patentability of software.  See our earlier post on the lower court rulings.

What is Patentable?

In the US, we have a law (35 USC §101) that lays out what kinds of subject matter are eligible for patent protection.  Under the law, which is pretty broad, any machine (like a smartphone), process (like how to make tires), article of manufacture (tires), or composition of matter (like toothpaste) is eligible for a patent grant.  To be clear, you don’t get such a patent unless the smartphone etc.  meets other requirements…like novelty (it’s the first one) and nonobviousness (its more than a straightforward tweak to existing technology).  But this “subject matter” test is the first test any invention has to meet in order to obtain a patent.  Think of the 110 meter high hurdles – you have to pass this first hurdle to have any chance of obtaining a patent.


But this is the US, so over the years courts have added caveats to this broad list of eligible subject matter.  A key caveat is that laws of nature, natural phenomena, and abstract ideas are not eligible for patents.  Why do we have these exceptions?  The general concern is that patents are granted in order to encourage progress in science and technology.  That progress is predicated on applying laws of nature or abstract ideas to solve problems. If somebody can get a patent on, e.g., an abstract idea, any future use of that idea could be precluded….which would frustrate, rather than promote, the very progress the patent system was set up to encourage.

This Decision.

The court looks at prior caselaw and concludes the test to be applied is this:

  • First, do the claims recite an abstract idea?
  • Second, is there other structure/function in the claims that render the claimed invention “significantly more” than the abstract idea?

Let’s look at the claim in question here (paraphrasing a tad):

  • a “shadow credit record and a shadow debit record” that is
  • held independently by a supervisory institution from the exchange institutions,
  • where “the supervisory institution adjust[s] each respective party’s shadow credit
    record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order,”
  • and where “at the end-of-day…the exchange institutions…exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments… the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.”  (based on the Opinion, Note 2)

Here’s the $64K question – do you think  this claim really, truly calls for an “abstract idea?”  Here’s why the court thinks it does:

On their face, the claims before us are drawn to….the concept of intermediated settlement..[which] is “a fundamental economic practice long prevalent in our
system of commerce.”  Opinion, Page 9

Three Problems.

First, what’s this “concept” discussion about?  When you apply for patents…and later, when you enforce them…every single word in the claims counts.  You don’t get to ignore words in the claim at any point of the process.  So how is it right, or fair, that for these purposes courts get to ignore the literal words of the claim, and find they really cover an abstract idea because they are “drawn to [a] concept?”

What’s so “abstract” about this claim? It does not simply say “I claim intermediated settlement.”  That might be a pithy way of expressing an opinion on the “essence” of what is claimed….but that is not what the claim actually says.  Seems to me there could be other ways of practicing “intermediate settlement” without infringing this claim.  The court did not say one way or the other.  More on that later.

Second, what’s this analysis of prior art (“a fundamental economic practice long prevalent in our system of commerce”) doing in what is supposed to be an analysis of eligible subject matter?  Remember our hurdle analogy….here the court talks about the second hurdle when we have not even crossed the first.  More to the point, by mashing together subject matter and novelty analyses, has Alice really gotten a fair shake at arguing either one?  For the purpose of deciding what is eligible to obtain a patent, it should not matter whether an invention is as old as the hills or as fresh as a daisy.  That should be a separate analysis.

Third, under the second part of the analysis, the Court discards limitations under which the method is implemented on a computer as a “wholly generic computer implementation” which “is not generally the sort of  additional feature” that will be the lynchpin of patentability.  So once again, we’re parsing claims, considering words in isolation.

OK……So, Now What?

Here, the court was following its precedent, so the solution is not yet another court case.  We  need Congress to clarify the law here to deal with this line of decisions.  In pertinent part I think the law should say

  1. You have to consider all the words in the claim in figuring out whether an invention is abstract.  No “essence,” “concept,” “boiling down,” etc.  All the words count.
  2. An invention can only be “abstract” if that is true regardless of whether it is as old as the hills or as fresh as a daisy.  In other words, how it compares to prior work should be irrelevant to this analysis.
  3. Even if we decide for some reason we must preserve this notion of boiling claims down to their base “concepts” for the purpose of this analysis, to me a claim should only be fatally “abstract” if and only if the actual claims as a whole are so basic and so broad such that there is no practical way of using the “general idea” without infringing the claim.  Then, and only then, might it make sense to forestall further analysis.

I don’t think that is the case here…I don’t think these specific claims as a whole recite the one and only way to conduct intermediated settlement.  The way it is now, courts look to the claim language only to see if there is anything left that somehow “salvages” an abstract idea.  But that methodology does not work either…it again does not consider the claims as a whole.  It simply becomes another characterization exercise that is at best loosely based on the claims.

This whole line of court cases on what is an “abstract idea” has just gotten out of hand.  This decision, and others like it, sacrifices fairness for the illusion of clarity.

Written by:

Downs Rachlin Martin PLLC

Downs Rachlin Martin PLLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.