United States: Abstract Idea Or Real World Software Solution?

On Dec. 6, the U.S. Supreme Court granted certiorari in CLS Bank Intl. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (Fed. Cir. 2013), to address the patent eligibility of computer implemented inventions. For some, the issue is emblematic of what they see as the problems resulting from U.S. Patent and Trademark Office granting "too many patents" for too trivial of inventions. Others see patent eligibility as the touchstone question for the future of research and development.

A patent may be obtained for any "process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 U.S.C. 101. These statutory categories are quite broad, covering "anything under the sun made by man." Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).

Even so, there are three exceptions: a patent may not cover a law of nature, a natural phenomenon, or an abstract idea. In Gottschalk v. Benson, 409 U.S. 67 (1972), the court articulated these exceptions to ensure no one could "preempt" the use of ideas and discoveries that are fundamental to scientific research and development. But the Supreme Court and the Federal Circuit have struggled with how to identify an "abstract idea." In Parker v. Flook, 437 U.S. 584 (1978), the court adopted a "mathematical algorithm" test, holding invalid a claim that added nothing inventive beyond the algorithm itself. In Diamond v. Diehr, 450 U.S. 175, 182 (1981), the court narrowed Flook, holding valid a claim that contained a well-known equation, and stating that it was improper to separate out the equation from the rest of the patent claim. The court did not address the issue of abstract ideas again until Bilski v. Kappos, 130 S. Ct. 3218 (2010).

At issue in Bilski was a method for hedging energy commodities. The Supreme Court rebuked the Federal Circuit - which had interpreted the Supreme Court to mean a process is patent eligible only if "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article to a different state or thing," the so-called "machine or transformation test." The court held that while that test is useful, it is not the sole test. Second, the court held that statute did not exclude business methods from being a "process." Finally, the court held that Bilski's method was an abstract idea. However, the court declined to set forth any particular test to identify an abstract idea, only referring to the "guideposts" in Benson, Flook and Diehr.

The Federal Circuit developed various abstract idea tests leading up to CLS Bank. Unfortunately, different judges proposed different and somewhat conflicting tests. Thus, in Cybersource v. Retail Decisions, 654 F.3d 1366 (2011), Judge William Bryson, joined by Judges Timothy Dyk and Sharon Prost, used the "mental steps" doctrine and found that a patent claim was an abstract idea because all of the steps can be performed in the human mind. Similarly, in Bancorp Servs. LLC v. Sun Life Assur. Co. of Canada, 687 F.3d 1266 (2012), Judges Alan Lourie and Evan Wallach, along with Prost, held that "[u]sing a computer to accelerate an ineligible mental process does not make that process patent-eligible."

By contrast, in Research Technologies Corp. v. Microsoft, 627 F.3d 859 (2010), Chief Judge Randall Rader, joined by Judges Pauline Newman and S. Jay Plager, upheld the patent eligibility of a method for producing half tone gray scale images. For this panel, Section 101 is only a "coarse filter," and such claims are only ineligible when "so manifestly abstract as to override the statutory language of section 101." In Ultramercial LLC v. Hulu LLC, 657 F.3d 1325 (Fed. Cir. 2011), vacated sub nom. WildTangent Inc. v. Ultramercial LLC, 132 S.Ct. 2431 (2012), Rader, Lourie and Judge Kathleen O'Malley considered a method of distributing digital products over the Internet. The court held that the claims eligible because they recited a "practical application" that required "intricate and complex computer programming." Importantly, Rader rejected the assertion that software is an abstract idea, citing In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994), which held that "programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed."

These disparate approaches led Plager to suggest in MySpace Inc. v. GraphOn Corp, 672 F.3d 1250 (2012), that district courts should avoid this "murky morass" by insisting that "litigants initially address patent invalidity issues in terms of the conditions of patentability defenses," a position shared by other members of the court.

These disparate views met head on in CLS Bank, which involved a computerized method of providing a third-party escrow system for currency exchanges. The district court held these claims invalid. O'Malley and Judge Richard Linn reversed, finding that the claim was limited to a "very specific application of the concept of using an intermediary to help consummate exchanges between parties." Taking the case en banc, the enlarged court vacated the panel decision and asked the parties what test it should adopt to determine whether a computer-implemented invention is a patent ineligible abstract idea.

To the dismay of many, the en banc court failed to provide unified guidance. A per curiam opinion affirmed the district court, followed by with six separate concurring and dissenting opinions. Lourie, joined by Dyk, Prost, Wallach and Judge Jimmie Reyna, argued that the key question is whether the claims "preempt" all "real world" "practical applications" of an abstract idea. Lourie offered a three-step approach: (1) determine whether the claims recite one of the statutory categories; (2) if so, identify whether the claim recites an ineligible exception; and (3) if so, determine whether the claim has sufficient limitations. These judges argued that Alice's patent claims did not have such limitations, and dismissed Alappat as being no longer relevant due to changes the law and technology. This view that is scientifically unjustified because Alappat is consistent with a fundamental principle in computer science, that anything that can be done by a hardwired computer circuit can be equivalently performed by a program.

Rader, joined by Linn, O'Malley and Judge Kimberly Moore, focused on whether a claim includes "meaningful limitations." Rader argued that the claims certainly required their implementation by a computer, and thus were statutory. Moore, joined by Rader, Linn and O'Malley, also relied upon Alappat, noting that "claims are to a system of tangible machine components with limited specialized functions programmed consistent with detailed algorithms disclosed in the patent," and that "no contortion of the term 'abstract idea' can morph this physical system into an abstract idea." Newman argued that Section 101 should be interpreted to protect the "right to study and experiment with the knowledge disclosed in patents." Rader offered a final reflection, lamenting his colleagues' focus on subjective considerations: "When all else fails, consult the statute!"

Even after CLS Bank, the divide in the Federal Circuit continued. In Ultramercial Inc. v. Hulu LLC, No. 10-1544 (Fed. Cir. June 21, 2013), Rader adopted in part Lourie's preemption framework, and again held that the Internet-based advertising system was patent eligible. In Accenture Global Services v. Guidewire Software Inc., No. 2011- 1486 (Fed. Cir. Sept. 5, 2013), Lourie, joined by Reyna, ruled that claims on a computerized insurance application system were not patent eligible, without considering the issue of preemption. Rader dissented, arguing that the claims did not preempt all practical applications because there were non-infringing ways of practicing the abstract idea.

The Supreme Court now has the opportunity to address the question of what constitutes an abstract idea, and thereby the patent eligibility of software. The court's recent cases may offer clues how it will rule. First, the court tends to consider inventions in broad, general terms, not the specifics of the technology. Thus, the detailed programming shown in Alice's patents will hold little weight. Further, the court gives no deference to either the USPTO's considerable experience, or its longstanding practice to grant software patents. Finally, the court may still have the unfortunate view, expressed in Benson 40 years ago, that computers "solv[e] a problem by doing arithmetic as a person would do it by head and hand." Thus, the court is likely to focus on whether the underlying idea in an invention can performed mentally, regardless of whether in fact the invention would only be implemented by a computer. If the court does adhere to this factually incorrect view of computers, then Section 101 will remain a "murky morass," as it will allow different courts to impose their own views on whether a claim can be performed in the human mind.

If on the other hand, the court follows Rader, Moore, Linn and O'Malley's view of the continued vitality and technological correctness of Alappat, then it can set forth a brighter dividing line between inventions that are purely abstract concepts, unlimited in practice, and those that are necessarily implemented by computers in the "real world."

CLS Bank will be important for the software industry as whole, and any company that relies on software technologies for its products. A decision is expected by June 2014.

Originally published in the Daily Journal on December 16, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
16 Nov 2018, Other, California, United States

Join leading dealmakers for a complimentary ​live video webcast panel on cross border M&A.

Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Sheppard Mullin Richter & Hampton
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Sheppard Mullin Richter & Hampton
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions