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On June 19, 2014, the Supreme Court issued its opinion in Alice Corp. v. CLS Bank
Int'l, No. 13-298, which was previously discussed here. In
a unanimous opinion by Justice Thomas, the Court held, consistent
with its precedent, that an abstract idea implemented on a generic
computer is patent ineligible subject matter.
The Court's decision affirms a divided en banc
Federal Circuit ruling that found patent ineligible the method,
medium, and system claims of Alice Corp.'s patent. Relying
principally on its Mayo and Bilski decisions, the
Court concluded:
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.
At the outset, the Court reiterated its two-part test for
distinguishing between patents that attempt to claim abstract
concepts and those that claim the patent eligible application of an
abstract concept: (1) "whether the claims at issue are
directed to one of those patent-ineligible concepts"; and (2)
if so, "what else is there in the claims"?
As foreshadowed during oral argument, the Court concluded that
Alice Corp.'s patent claims were directed toward an abstract
concept, much like the financial risk hedging claims at issue in
Bilski. In doing so, the Court relied on its previous
decisions holding that mathematical concepts and algorithms are
abstract concepts. The Court also expressly rejected Alice
Corp.'s contention (relying on language in Mayo v.
Prometheus) that the abstract-idea category must be confined
to "preexisting, fundamental truths that exist in principle
apart from any human action." The Court noted that the
Bilski patent, involving a "longstanding commercial
practice," was "a method of organizing human activity not
a 'truth' about the natural world 'that has always
existed.'" The Court further noted that the Court had not
assigned any "special significance" to the fact that one
of the Bilski claims had "reduced hedging to a
mathematical formula." Based on the similarity of the claims
at issue and those in Bilski, the Court found it
unnecessary to provide additional guidance as to what other subject
matter would be deemed an abstract idea.
Turning to the second part of its two-part test, the Court found
the claims at issue did not contain an "inventive
concept," regardless of whether the claim elements were
considered individually or as an "ordered combination";
instead, the claims merely recited implementing an abstract concept
on a generic computer. The Court emphasized that "[s]tating an
abstract idea while adding the words 'apply it with a
computer'" is not sufficient. Distinguishing Diamond
v. Diehr, 450 U.S. 175 (1981) (holding a computer-implemented
process for curing rubber was patent eligible), the Court concluded
that the claims did not "improve the functioning of" a
computer itself nor "effect an improvement in any other
technical field."
The Court ultimately treated the method, system, and
computer-readable medium claims the same way. First, considering
the method claims, the Court stated that that they "simply
recited the concept of intermediated settlement as performed by a
generic computer" and thus were not patent eligible. The Court
then concluded that the system claims "fail for substantially
the same reason" as those claims only recited "purely
functional and generic" hardware and were thus "no
different from the method claims in substance." The Court
explained that that it has "long warn[ed] ... against
interpreting §101 in ways that make patent eligibility depend
simply on the draftman's art" (internal quotations
omitted) and that "[h]oldng that the system claims are patent
eligible would have exactly that result." Regarding the
computer-readable medium claims, Alice Corp. had already conceded
"that its media claims rise or fall with its method
claims."
Writing separately, Justice Sotomayor (with Justices Ginsburg
and Breyer joining), suggests that she may have affirmed on broader
grounds, pronouncing that she "adhere[s] to the view that any
'claim that merely describes a method of doing business does
not qualify as a 'process' under §101.'"
The Court's decision may impact some categories of
inventions. The decision clarifies that the mere recitation of
generic computer hardware elements is insufficient to establish
eligibility of an otherwise abstract concept. As for the
"machine or transformation" test applied in
Bilski, the Court noted there is "no dispute that a
computer is a tangible system (in §101 terms, a
'machine')." It went on, however, to hold that this
was not the end of the inquiry because it must also be determined
whether the limitations reflect an "inventive concept"
sufficient to "transform" the claimed abstract idea into
a patent-eligible application.
The potential impact of the decision, however, is not
necessarily limited to one area and may extend to wide-ranging
areas of technology that future parties contend are drawn to
abstract ideas, natural phenomena or laws of nature. More parties
may decide to bring invalidity challenges under § 101.
Looking forward, patent practitioners will need to carefully
draft patents in light of today's ruling. Patent applicants may
find it advisable to more clearly delineate how a claimed invention
would avoid complete preemption of the application of an abstract
idea, natural phenomenon, or law of nature. To the extent such
concepts are implicated, applicants may find it necessary to
describe how the invention is addressed to more specific
applications of those concepts that are new and non-obvious.
The decision could impact the PTO's practice guidelines in
drafting claims, as well as litigation of computer-implemented
invention clams. For example, while this case does not involve the
laws of nature or natural phenomena that are the subject of the
PTO's recent Subject Matter Eligibility Guidance, the decision
explains the "framework" for analyzing such claims for
eligibility under Mayo. As the Court notes, "the
approach ... considers all claim elements, both individually and in
combination, [and so] it is consistent with the general rule that
patent claims 'must be considered as a whole.'" The
impact on the PTO's Guidance is yet to be seen. On June
25, 2014, the PTO issued amemo
to Examining Corpsregarding the application
of the decision.
While the Court's holding serves to limit patent
eligibility, aspects of the decision caution against an expansive
application of the judicially created exceptions to patent
eligibility, stating that it "tread[s] carefully in construing
this exclusionary principle lest it swallow all of patent law"
because "at some level, all inventions...embody, use, reflect,
rest upon, or apply laws of nature, natural phenomena, or abstract
ideas." The Court's decision leaves in place the long
standing rule that practical applications of abstract ideas
"to a new and useful end" are patent eligible subject
matter. Citing to Mayo, the Court noted "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." The precise extent of
the impact on various classes of patents will be borne out with
future decisions from district courts and the Court of Appeals for
the Federal Circuit.
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.