United States: Supreme Court On Evaluation Of Claims To Computer-Implemented Inventions Under 35 U.S.C. § 101

On June 19, 2014, the Supreme Court of the United States issued its much anticipated decision in Alice Corporation Pty. Ltd. v. CLS Bank International et al., confirming that computer-implemented inventions, such as computer software, remain eligible subject matter for patent protection in the United States.  The unanimous decision of the court, written by Justice Thomas, also confirmed the court's prior precedent that abstract ideas (such as the "concept of [the] intermediated settlement" at issue in this case) are not patent eligible.  The Supreme Court confirmed that in accordance with its prior precedent, the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.  There must be something more, such as additional features or steps that are more than "well-understood, routine, conventional activities" to provide practical assurance that a claim to a computer-implemented invention is more than a drafting effort designed to monopolize the abstract idea itself.

Case Background

Petitioner Alice Corporation Party, Ltd. is the assignee of patents that disclose a method for mitigating settlement risk.  CLS Bank International filed a declaratory judgment action that it did not infringe the Alice patents and that the patents were invalid, inter alia, under 35 U.S.C. § 101.  Alice filed counterclaims alleging patent infringement.

The patents at issue include method, computer-readable media and system claims.  The claims require a computer to be used as part of the steps or elements of the claims (the parties stipulated that the method claims include the use of a computer).

Procedural History

Following the Supreme Court's 2010 decision in Bilski v. Kappos (IP Update, Vol. 13, No. 7), the district court agreed with CLS that all claims (method, computer-readable media and system claims) were patent ineligible under § 101, because they claimed the abstract idea of "employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk."  On appeal, the U.S. Court of Appeals for the Federal Circuit in a divided panel decision (Linn, J.), reversed the district court and found all claims to be patent eligible because it was not "manifestly evident" that the claims covered an abstract idea.  IP Update, Vol. 15, No. 7

Shortly thereafter, the Federal Circuit, sitting en banc, issued a per curiam decision reversing the three-judge panel majority decision and affirming the district court's decision, finding all claims to be patent ineligible.  A five-member plurality (Lourie, J., joined by Judges Dyk, Prost, Reyna and Wallach) found all claims patent ineligible as abstract ideas.  IP Update, Vol. 16, No. 5.  Judge Lourie stated that Alice's claims "draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary," and the use of a computer to maintain, adjust and reconcile shadow accounts added nothing of substance to the abstract idea. 

In a portion of Chief Judge Rader's opinion joined by Judge Moore, Judge Rader agreed with the conclusion of Judge Lourie's plurality opinion that the method and computer-readable media claims were patent ineligible as abstract ideas.  In another portion of Chief Judge Rader's opinion, joined by Judges Linn, Moore and O'Malley, unlike Judge Lourie's plurality opinion, Chief Judge Rader would have found that the computer system claims were patent eligible, with Judge Moore reaching the same conclusion in her separate opinion. 

Judge Newman argued that all of Alice's patent claims (method, computer-readable media and system claims) are patent eligible.  Judges Linn and O'Malley reached the same conclusion in a separate opinion.

Certiorari

The Supreme Court granted certiorari to consider the question of "[w]hether claims to computer implemented inventions—including claims to systems and machines, processes, and items of manufacturer—are directed to patent eligible subject matter within the meaning of 35 U.S. C. § 101 as interpreted by this Court?"  IP Update, Vol. 16, No. 12

Supreme Court Decision

In its unanimous decision, the Supreme Court affirmed the Federal Circuit's per curiam decision, finding all claims patent ineligible.  In reaching this decision, the Supreme Court first cited "the "important implicit exception" to § 101 that laws of nature, natural phenomena and abstract ideas are not patent eligible, citing the 2012 Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics (Mayo).  IP Update, Vol. 16, No. 6.  Justice Thomas reminded us that the Supreme Court has "interpreted § 101 and its predecessors in light of this exception for more than 150 years" and pointed out that "the concern that drives this exclusionary principle is one of pre-emption," citing Bilski "upholding the patent 'would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.'" 

Citing Mayo, Justice Thomas emphasized that patent law should not "inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity."  However, he cautioned that "[a]t 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 upon, or apply laws of nature, natural phenomena, or abstract ideas.'"

Justice Thomas next discussed the "framework" set forth in Mayo for distinguishing patents that claim laws of nature, natural phenomena and abstract ideas from those that claim "patent-eligible applications of those concepts."  First, the Supreme Court must determine whether the claims at issue are directed to one of those patent-ineligible concepts.  If so, the court next asks "[w]hat else is there in the claims before us?"  To answer that question, Justice Thomas pointed out that the elements of each claim must be considered individually and as an ordered combination to determine whether the additional elements "transform the nature of the claim into a patent-eligible application."  He stated that "[w]e have described step two of the 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 Supreme Court then found that Alice's claims at issue were drawn to an abstract idea:

It follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea.  Petitioner's claims involve a method of exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk ...

Like the risk hedging in Bilski, the concept of intermediated settlement is 'a fundamental economic practice long prevalent in our system of commerce.'

The Supreme Court rejected Alice's argument that abstract ideas should be limited to preexisting, fundamental truths that exist in principle apart from any human action, pointing out that Bilski belies this assertion because the risk hedging in that case was a "fundamental economic practice."

Next, the court reviewed whether Alice's claims contained something more than the abstract idea itself sufficient to render the claims patent eligible.  The Court found they did not: 

Because the claims at issue are directed to the abstract idea of intermediated settlement, we turn to the second step in Mayo's framework.  We conclude that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention. 

Justice Thomas next discussed the second step in the Mayo analysis: examining a patent claim to determine whether it contains an "inventive concept" sufficient to "transform" the claimed abstract idea into a patent-eligible application.  The Supreme Court indicated that a claim that recites an abstract idea must include "additional features" to ensure the claim is more than a drafting effort designed to monopolize the abstract idea, and transformation into a patent-eligible application requires more than simply stating the abstract idea while adding the words "apply it."  The court also found that introduction of a generic computer into the claims does not alter the analysis in the second step of the Mayo analysis and is not enough to convert a patent ineligible abstract idea into a patent eligible invention.  "The relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.  They do not." 

Concurring Opinion

Justice Sotomayor, in her concurring opinion joined by Justices Ginsburg and Breyer, would have found that all claims to business methods are patent ineligible.  "I adhere to the view that any 'claim that merely describes a method of doing business does not qualify as a 'process' under § 101.'"  However, she concurred with the majority opinion by Justice Thomas that the claims at issue are drawn to an abstract idea and therefore joined the opinion of the court.

Practice Note

The Mayo two-step test, although unsatisfying to many commentators, is the test that the U.S. Patent and Trademark Office and the courts will be tasked with applying in determining whether a computer-implemented invention is patent eligible under § 101.  Under the two-step analysis, a patent examiner or judge will first determine whether the claim is drawn to a patent-ineligible abstract idea.  If the answer is "yes," then the second step will be to review the claim to determine whether it contains an "inventive concept" sufficient to "transform" the claimed abstract idea into a patent-eligible application.  In step two, the reviewer will need to determine if a claim includes "additional features" to ensure the claim is more than a drafting effort designed to monopolize the abstract idea.  The transformation into a patent-eligible application will require more than simply stating the abstract idea while adding the words "apply it" to a particularly technological environment.  Also, introduction of a generic computer to apply the steps of the claim will not be enough to convert a patent ineligible abstract idea into a patent eligible invention.

Supreme Court on Evaluation of Claims to Computer-Implemented Inventions under 35 U.S.C. § 101

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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.

Disclaimer

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.

General

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