Supreme Court Issues Decision in Alice Corp. v. CLS Bank - Alice Corp. v. CLS Bank International (2014)

by McDonnell Boehnen Hulbert & Berghoff LLP

Supreme Court Building #2Yesterday, in Alice Corp. v. CLS Bank, the Supreme affirmed the Federal Circuit's per curiam opinion in CLS Bank v. Alice Corp. in a unanimous opinion by Justice Thomas with a concurring opinion by Justice Sotomayor joined by Justices Breyer and Ginsberg.  The decision appears to be an incremental one, insofar as it does not strike down all software patents and is crafted as an application of the Court's earlier precedent, particularly Bilski v. Kappos and Mayo Collaborative Serv. v. Prometheus Labs.

The decision affirms patent ineligibility for the method claims (directed, according to the Court, to methods for implementing an intermediated settlement that are well-known in the art), system claims involving implementation of the method using a general purpose computer and computer code for directing a general purpose computer to implement the method.  From the opinion, it is clear that the Court is still striving for balance between tying up fundamental building blocks that would inhibit innovation while not swallowing patent law whole because everything ultimately is based on an abstract idea, law of nature or natural phenomenon:

We have "repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of " these  building  blocks of human ingenuity" [quoting O'Reilly v. Morse as cited in Mayo].  "At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law" because "[a]t some level, "all inventions . . . embody, use, reflect, rest upon, or apply laws of  nature, natural phenomena, or  abstract ideas" [citing Mayo].

Accordingly, in applying the §101 exception, we must distinguish between patents that claim the "'buildin[g] block[s]'" of human ingenuity and those that integrate the building blocks into something more, thereby "transform[ing]" them into a patent-eligible invention.  The former "would risk disproportionately tying up the use of the underlying" ideas and are therefore ineligible for patent protection.  The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws" [citing liberally from the Mayo opinion].

The Court considers the Mayo opinion to have provided the framework for performing the patent-eligibility analysis:

First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.  If so, we then ask, "[w]hat else is there in the claims before us?"  To answer that question, we consider the elements of each claim both individually and "as an ordered combination" to determine whether the additional elements "transform the nature of the claim" into a patent-eligible application.  We have described step two of this analysis as 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."

The Court also considers its jurisprudence from Gottschalk v. Benson, through Parker v. Flook, Bilski and to Mayo to be consistent in both the underlying principles and how the analysis should be done.  The opinion distinguishes its seemingly contrary decision in Diamond v. Diehr in a way that may be useful in making decisions regarding what is patent-eligible subject matter (and how it should be claimed):  "In other words, the claims in Diehr were patent eligible because they improved an existing technological process, not be­cause they were implemented on a computer" (emphasis added).  And, in a footnote, the Court declares that its Mayo analysis is consistent with the patent law principle that the claims should be considered as a whole because the Mayo decision instructs a court to consider the elements of the claim at issue both individually and as a whole.

The Court's opinion expressly ties its decision here to the decision in Bilski, based on the perceived similarity between attempts in each case to preempt a preexisting human activity (hedging in Bislki, intermediated settlement here) as being abstract ideas (and once again conflating Section 101 with Sections 102 and 103), the Court stating that "[i]t is enough to recognize that there is no meaningful distinc­tion between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.  Both are squarely within the realm of 'abstract ideas' as we have used that term."  And after a brief discussion of the Court's understanding of how a conventional general purpose computer works, the Court opines that how the computer implements the claimed (and ineligible) method is not "enough" to render the system claims patent eligible because said implementation is entirely conventional.

The Court's opinion also provides guidance on how it will determine what is "enough" that must be added to an abstract idea, law of nature or natural phenomenon to render a claim encompassing these categories to be patent-eligible, based on the rubric that there must be something in the claimed invention that improves existing technology:

The method claims do not, for example, purport to improve the functioning of the computer itself.  ("There is no specific or limiting recitation of . . . improved computer technology . . . "); Brief for United States as Amicus Curiae 28–30.  Nor do they effect an improvement in any other technology or technical field.  Instead, the claims at issue amount to "nothing significantly more" than an instruction to apply the ab­stract idea of intermediated settlement using some un­specified, generic computer.  Under our precedents, that is not "enough" to transform an abstract idea into a patent-eligible invention [citations omitted].

The system and computer-readable medium claims stand and fall with the method claims:

Put another way, the system claims are no different from the method claims in substance.  The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea.  This Court has long "warn[ed] . . . against" interpreting §101 in ways that make patent eligibility 'depend simply on the draftsman's art.'"

The Court's decision is entirely consistent with its disinclination to enunciate broad proscriptions against patenting particular areas of technology, as evidenced by its decisions in Bilski (which did not rule all business method claims to be patent-ineligible), Association for Molecular Pathologists v. Myriad Genetics (which was limited to rendering genomic DNA patent-ineligible but did not disturb patent-eligibility for cDNA, and contained express proscriptions against reading the decision to encompass methods or other applications of the knowledge of the BRCA genes, despite the PTO's recent Guidelines that appear to ignore these proscriptions) and even Bowman v. Monsanto, which cautioned against interpreting the Court's decision in that case to apply to all "self-replicating technologies."

Justice Sotomayor's concurring opinion is brief and to the effect that the Justice believes business method patents to be patent ineligible per se because they do not fall within the ambit of a "process" under the Patent Act.  Justices Breyer and Ginsberg join her here, as they did in Justice Stevens' concurring opinion in Bilski.  The other Justices apparently are not yet ready to make all business method claims ineligible for patenting, provided that they satisfy the rule reiterated here that there must be something that improves existing technology or otherwise does not merely adapt methods for controlling human activity for implementation by a computer.



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McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP on:

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