On June 19, 2014, the Supreme Court unanimously decided Alice Corp. v. CLS Bank Int'l. and
held that the claimed computer-implemented business method did not
recite patent-eligible subject matter. The Alice decision
examines the subject matter eligibility of computer-related patents
under 35 U.S.C. § 101 and is the latest since Bilski v. Kappos to review the
abstract idea exception to patent subject matter eligibility. The
decision applies a two-part test to determine whether a patent
claim falls under the abstract idea exception. Justice Thomas wrote
the opinion of the Court.
The business method patents at issue in Alice were
directed to a computer-implemented scheme for mitigating settlement
risk in certain financial transactions. The claims included a
method, a computer-readable medium, and a system.1
The Court began its analysis by reaffirming the traditional three
exceptions to subject matter eligibility in §101, namely laws
of nature, natural phenomena, and abstract ideas. Next, the Court
applied a test for the abstract idea exception, relying on its
analysis of the laws of nature exception from Mayo Collaborative Services v. Prometheus
Laboratories, Inc. The test contains two parts:
first, determine whether the claims are drawn to an abstract idea;
and second, if so, determine whether the claims contain an
inventive concept sufficient to transform the claimed abstract idea
into a patent-eligible application.
As to the first part, the Court declined "to delimit the
precise contours of the 'abstract ideas' category."
Similar to the result in Bilski, the Court found that the
claims at issue recited the abstract idea of intermediated
settlement. "Like the risk hedging in Bilski, the
concept of intermediated settlement is a fundamental economic
practice long prevalent in our system of commerce. The use of a
third-party intermediary (or 'clearing house') is also a
building block of the modern economy. Thus, intermediated
settlement, like hedging, is an 'abstract idea' beyond the
scope of § 101."
As to the second part, the Court noted that a "claim that
recites an abstract idea must include additional features to ensure
that the claim is more than a drafting effort designed to
monopolize the abstract idea." To transform an abstract idea
into patent eligible subject matter, the transformation
"requires more than simply stating the abstract idea while
adding the words 'apply it.'" Further, "the mere
recitation of a generic computer cannot transform a
patent-ineligible abstract idea into a patent-eligible
invention." Also, "limiting the use of an abstract idea
to a particular technological environment" is not enough to
transform a patent-ineligible abstract idea into a patent-eligible
invention. As such, "if a patent's recitation of a
computer amounts to a mere instruction to implement an abstract
idea on a computer, that addition cannot impart patent
eligibility." "Given the ubiquity of computers, wholly
generic computer implementation is not generally the sort of
additional feature that provides any practical assurance that the
process is more than a drafting effort designed to monopolize the
abstract idea itself."
Applying the second part of the test, the Court found that the
claims did no "more than simply instruct the practitioner to
implement the abstract idea of intermediated settlement on a
generic computer." As to the method claim, "each step
does no more than require a generic computer to perform generic
computer functions." As such, the method claims did not recite
eligible subject matter. Likewise, as the computer-readable medium
claims were stipulated to rise or fall with the method claims, they
too were found invalid. Contrary to the method claims, the system
claims recited specific hardware: a data processing system, a
communications controller, and a data storage unit. However, the
Court found that these system claims were also directed to a
patent-ineligible abstract idea. The Court reasoned that the
claimed specific hardware was purely functional and generic and
that "none of the hardware recited by the system claims offers
a meaningful limitation beyond generally linking the use of the
method to a particular technological environment, that is,
implementation via computers." Hence, the Court ruled that all
of the claims were directed to the abstract idea exception of
patent-eligible subject matter and, as a result, were
invalid.
Although the decision was unanimous, a three-justice concurring
opinion was filed by Justice Sotomayor. The concurrence agreed that
the claims fall under the abstract idea exception, but would have
also held that business method patents in general do not qualify as
patent-eligible subject matter.
Stopping short of ruling that all business method patents are
patent-ineligible, the Supreme Court tightened the patent-eligible
standard in ruling that a patent must do more than require a
generic computer to perform generic computer functions. In applying
its two-part test to the above-mentioned computer-related patents,
the Supreme Court took a big step in clarifying which types of
software inventions are patent-eligible. This test will likely
continue to be refined.
Footnote
1 The following is a representative method claim:
33. A method of exchanging obligations as between parties, each
party holding a credit record and a debit record with an exchange
institution, the credit records and debit records for exchange of
predetermined obligations, the method comprising the steps
of:
(a) creating a shadow credit record and a shadow debit record for
each stakeholder party to be held independently by a supervisory
institution from the exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance
for each shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the
supervisory institution adjusting each respective party's
shadow credit record or shadow debit record, allowing only those
transactions that do not result in the value of the shadow debit
record being less than the value of the shadow credit record at any
time, each said adjustment taking place in chronological order;
and
(d) at the end of day, the supervisory institution instructing
on[e] of the exchange institutions to exchange credits or debits to
the credit record and debit record of the respective parties in
accordance with the adjustments of the said permitted transactions,
the credits and debits being irrevocable, time-invariant
obligations placed on the exchange institutions.
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.
