E-TIPS® previously reported on the case Alice Corporation v CLS Bank International (Alice) as it wound its way through the US court system (see here and here). This case was closely watched as the courts struggled with the issue of what is patentable subject matter under section 101 of the US Patent Act as it relates to business methods implemented by software.

On June 19, 2014, the US Supreme Court (USSC or Court) issued a unanimous 9-0 decision, affirming the 5-5 en banc decision of the Court of Appeals for the Federal Circuit, holding that the patent claims at issue in Alice were not patentable, as they were drawn to a patent-ineligible abstract idea.

In Alice, the patents at issue related to the mitigation of "settlement risk" by using a computer system as a third-party intermediary. The claims of the patents claimed methods for exchanging financial obligations and for the computer systems and computer-readable media containing program code to carry out the methods of exchanging obligations.

Interestingly, before determining the issue, the USSC noted that laws of nature, natural phenomena, and abstract ideas are implicit exceptions from the subject matter eligible for patent protection under section 101 of the US Patent Act. The Court stated that the concern driving the exclusion of this subject matter was to avoid monopolization of these "building blocks of human ingenuity". However, the USSC noted it should "tread carefully in construing this exclusionary principle lest it swallow all of patent law."

The Court then reviewed the two-step test that it had set out in Mayo v Prometheus (reported by E-TIPS® here). The first step of the test requires that the claims at issue be directed to one of the categories of patent-ineligible subject matter. If yes, the second step of the analysis requires considering whether the additional elements of the claim are sufficient to transform that abstract idea into a patent-eligible application.

Applying the test to the facts at issue, the USSC found that the claims were directed to an abstract idea because they were drawn to intermediated settlement, which is a "fundamental economic practice".

The Court further found that the additional elements of the claims were not sufficient to "transform" the abstract idea into a patent-eligible application, holding that the method claims (which merely required generic computer implementation of the abstract idea) did not cover patent-eligible matter. The Court similarly rejected the patent eligibility of the media and system claims at issue.

The use of a computer to improve an existing technological process could be patentable subject matter, said the Court, as was the case in Diamond v Diehr, which involved a computer-implemented process for curing rubber. However, given the ubiquity of computers, merely reciting generic computer implementation to turn an abstract idea

into patent-eligible subject matter would permit monopolization of the abstract idea by a drafting exercise.

In a concurring opinion, in addition to finding that the method claims at issue were drawn to an abstract idea, Justice Sotomayor, joined by Justices Ginsburg and Breyer, would have found that business methods do not qualify as "processes" under section 101.

The USPTO has now issued Preliminary Examination Instructions for determining subject matter eligibility in light of the Alice decision, and is seeking public comment.

For commentary about Alice, follow these links:




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