Under 35 U.S.C. § 101, a person may obtain a patent on "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Despite the broad wording of § 101, courts have long recognized that certain subject matter is not eligible patenting, including laws of nature, natural phenomena, and abstract ideas.
For many years, the Federal Circuit applied the "machine or transformation" test to determine whether a patent was directed to eligible subject matter under § 101. Under that test, a claimed invention was deemed patent-eligible if, (i), it was tied to a particular machine or apparatus, or, (ii), it transformed a particular article into a different state or thing. In 2010, however, the Supreme Court held in Bilski v. Kappos that the "machine or transformation" test is not the exclusive test for patent eligibility. In that case, the Court held that a process does not become patent-eligible merely because it is performed by a computer. In particular, the Court held that the concept of using a computer to hedge risks in the energy market was a patent-ineligible abstract idea.
In 2013, the Federal Circuit issued an en banc decision in CLS Bank v. Alice Corp. addressing whether patent claims directed to the computer automation of escrow services were eligible for patenting under § 101. As in Bilski, the Federal Circuit held that a method that merely sets forth "generic computer automation" of an abstract concept (using a computer to implement an escrow arrangement) was not sufficient under § 101. The Judges of the Federal Circuit, however, were split on whether a system claim incorporating certain computer components (e.g., a "data storage unit" and a "communications controller") would satisfy § 101. The Federal Circuit's decision has lead many commentators to fear that computer software – which, at some level, typically involves automation of an abstract concept – will no longer be eligible for patenting.
In December 2013, the Supreme Court granted certiorari in the CLS Bank case to consider "whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101." Oral argument was held on March 31, 2014. Based on questions asked during the argument, the Supreme Court appeared likely to affirm the finding that the claims at issue in CLS Bank were not eligible for patenting. The Supreme Court, however, also appeared to struggle with where to draw the line between a patent eligible software and ineligible abstract ideas.
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