Supreme Court Decision in Alice Corp. v. CLS Bank Raises More Questions Than Answers

by LeClairRyan
Contact

The Supreme Court recently issued its much anticipated decision in Alice Corp. v. CLS Bank, unanimously affirming the Federal Circuit's en banc decision finding the method, system, and computer readable medium claims at issue patent ineligible under the judicially created abstract idea exception. The case reaffirms the analysis for patentability pursuant to the exceptions to the broad eligibility requirements set forth in 35 U.S.C. § 101, and also reaffirms that the mere recitation of computer related elements in a patent claim is insufficient to transform a claim encompassing an abstract idea into patentable subject matter. The Supreme Court, however, did not provide a broad pronouncement on the patentability of software patents. Instead, the Supreme Court merely determined the claims at issue failed to present patentable subject matter based on its prior precedents. Thus, the present decision does not provide further clarity regarding the metes and bounds of the abstract idea exception, which will now need to be developed through further litigation related to software patents and actions by the USPTO.

The invalidated patent at issue in Alice Corp. included method, system, and computer readable medium claims related generally to managing settlement risk through a third party intermediary. The parties stipulated that all three sets of claims required computer implementation, despite the lack of any specific computer related elements in the method claims. Thus, the Petitioner conceded in the Federal Circuit that all three claim sets would rise or fall together.

The Supreme Court, in invalidating the patent, reiterated the test set forth in Mayo v. Prometheus for evaluating patent claims pursuant to the judicially created exceptions to patent eligibility. That test provides a two-part analysis to determine: (1) whether the claims are directed to a patent ineligible concept, i.e., directed to laws of nature, natural phenomena, or abstract ideas; and (2) if so, whether the claims provide an "inventive concept" sufficient to transform the claims into patent eligible subject matter. Utilizing this test, the Supreme Court held the claims, which it characterized as a computer implemented scheme for mitigating settlement risk by using a third party intermediary, were drawn to an abstract idea and that the claim elements merely required generic computer implementation. As such, the Supreme Court determined the claims failed to transform the abstract idea into a patentable invention.

The Supreme Court, in the first step of the analysis, relied on its precedent in determining that the claims at issue related to an abstract idea. The Court analogized the claims to the claims in Bilski v. Kappos directed to a method of risk hedging, which were deemed invalid. The Court characterized the claims as directed to a "fundamental economic practice" and "a building block of modern economy." The Court declined to restrict the abstract idea exception to a narrower definition requiring a pre-existing fundamental truth that exists apart from any human action, such as an algorithm. The Court also failed to delineate any other boundaries limiting the definition of an abstract idea, and instead merely held the claims at issue were clearly within the realm of the term as defined under its established case law.

The Supreme Court then determined the claims failed the second part of the test as lacking an inventive concept beyond the abstract idea. The Court found that the method claims merely detailed implementation of the abstract idea on a generic computer utilizing well-understood, routine, conventional computer functions. The Court further stated the method claims fail to improve the functioning of the computer or effect an improvement in any other technical field. The Court further found the computer related elements recited in the system claims (e.g., data processing system, communications controller, and data storage unit) were completely functional and generic. The system claims were deemed to encompass the same substance as the method claims and were viewed as differing solely based on drafting techniques.

The Supreme Court's decision focused on the facts at issue in view of the established precedent. Thus, the decision failed to provide any broad pronouncement on the patentability of software related inventions, or on what constitutes an abstract idea. Although the Supreme Court has clearly set forth that the mere recitation of computer related elements will not save a claim that is otherwise deemed to recite an abstract idea, the standard for evaluating claims under section 101 was not altered. The limits on what constitutes an abstract idea and what additional limitations are necessary to transform such a claim into patentable subject matter under the current standards, however, are not entirely clear at this time. Thus, the patentability of software patents will certainly be an ongoing issue in litigation, as well as an issue the United States Patent and Trademark Office may further address in view of the Alice Corp. decision.

 

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.

© LeClairRyan | Attorney Advertising

Written by:

LeClairRyan
Contact
more
less

LeClairRyan 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):
hide

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.

Security

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 info@jdsupra.com. 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: info@jdsupra.com.

- 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.