INTRODUCTION

In 2014, Alice Corp. v. CLS Bank ushered in a shift in the requirements for patent eligibility in the areas of business method and software patents.1 The Supreme Court put an end to the era of the "pure" business method patent by effectively requiring that such inventions yield technological improvements instead of merely a useful result.2 Alice sent shockwaves of uncertainty through the patent law community.3 The Supreme Court declared Alice Corp.'s business method patent claims invalid as patent-ineligible subject matter under 35 U.S.C. § 101.4 Applying a new two-prong test, the Court held that (1) Alice Corp.'s claims were "directed to"—i.e., claimed, at least in part—the "abstract idea" of intermediated settlement and (2) failed to add "significantly more" to that abstract idea; thus, the patent claims amounted to no more than a mere claim to the abstract idea itself.5

Alice Corp.'s patent was for a method of mitigating settlement risk in financial transactions between two parties.6 Settlement risk is the risk that one party will not pay, but still receive the benefit of the exchange.7 Alice Corp.'s solution was to have a computer serve as a trusted third-party intermediary, which would monitor each party's financial records and allow transactions only if both parties have the resources to meet their obligations.8

The Court reasoned that intermediated settlement is an abstract idea because it is a "fundamental economic practice," and the method failed to add significantly more because the recited computer functions were "'well-understood, routine, conventional activit[ies]' previously known to the industry."9 The Court suggested that the claims at issue would have been more likely to meet the requirements for patent eligibility if they had purported to improve the functioning of the computer technology itself.10

Many had called for the Court to discourage patent trolling behavior by reigning in overbroad patent claims like those at issue in Alice. 11 Patent trolls are non-practicing entities that do not invent new technologies or make any products.12 Their primary business model is to buy the patent rights of others and make money by asserting patent claims against alleged infringing practicing entities.13 Some patent troll business models are indifferent to, and may even thrive off of, weak patents that the USPTO would likely invalidate upon review.14 Thus, patent trolls commonly thrive off of costly patents that provide no benefit to society.15

Many patent system stakeholders see the Alice decision as a victory over patent trolls because it provides a check on patents of poor quality that threaten to preempt downstream innovation.16 However, Alice's two-step standard—originating in the biotech arena with Mayo v. Prometheus Labs and made applicable to the realm of business method and software patents by Alice—is far from a model of clarity.17 The standard is malleable and unpredictable. Patent drafters are often left guessing what a patent examiner, a Patent Trial and Appeal Board (PTAB) judge, or the courts will consider to be an "abstract idea" and when the claims may be deemed patent-eligible for adding "significantly more."18

The law in this area is constantly evolving. The USPTO publishes updated guidelines based on case law applying the Alice/Mayo standard, in an attempt to add clarity and consistency to its examination procedures.19 How the law develops and how it is applied moving forward will have long-term effects on the progress of new technologies near the intersection of computing technology and business methods.20 At one extreme, if the USPTO grants business method patents that are highly abstract, patent trolls could emerge victorious and stunt technological growth by creating an ever-expanding thicket of useless patents.21

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Footnotes

1. Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208; see Donald S. Chisum, The Supreme Court's Alice Decision on Patent Eligibility of Computer-Implemented Inventions: Finding an Oasis In the Desert, PATENTLYO (June 23, 2014), https://patentlyo.com/patent/2014/06/eligibility-implemented-inventions.html [https://perma.cc/D7LK-2Y5L].

2. Chisum, supra note 1.

3. See Alice, supra note 1; Chisum, supra note 1.

4. See Alice, supra note 1, at 212,

5. See U.S. Patent No. 5,970,479 (filed May 28, 1993) (issued Oct. 19, 1999) (containing claim 33, which was cited by the Supreme Court in Alice); 35 U.S.C. § 101 (2018); See Alice, supra note 1, at 212, 225.

6. See Alice, supra note 1, at 212.

7. Id.

8. Id.

9. Id. at 225 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 68 (2012)).

10. Id.

11. Julie Samuels & Daniel Nazer, EFF Urges Supreme Court to Crack Down on Patent Trolls, ELEC. FRONTIER FOUND. (Mar. 3, 2014), https://www.eff.org/press/releases/eff-urges-supreme-court-crack-down-patent-trolls [https://perma.cc/K7GK-HP3A].

12. Jim Kerstetter & Josh Lowensohn, Inside Intellectual Ventures, the Most Hated Company in Tech, CNET: TECH INDUSTRY (Aug. 21, 2012, 6:57 AM PDT), https://www.cnet.com/news/inside-intellectual-ventures-the-most-hated-company-intech/ [https://perma.cc/9GG2-P4W2].

13. Mark A. Lemley & A. Douglass Melamed, Missing the Forest for the Trolls, 113 COLUM. L. REV. 2117, 2118–2128 (2013).

14. See id. at 2126 (comparing the business models of "bottom-feeder" trolls, "patent aggregators," and "lottery-ticket" trolls).

15. Id. at 2124.

16. See Alice Decision Saves Crowdfunding From Patent Troll, ELEC. FRONTIER FOUND., https://www.eff.org/alice/alice-decision-saves-crowdfunding-patent-troll [https://perma.cc/YD4H-5UV2] (last visited Jan. 10, 2019).

17. See USPTO, 2014 INTERIM ELIGIBILITY GUIDANCE QUICK REFERENCE SHEET (2014), https://www.uspto.gov/sites/default/files/documents/2014_eligibility_qrs.pdf [https://perma.cc/ZU86-UUQT]; Mayo Collaborative Servs. v. Prometheus Labs., Inc. , 566 U.S. 66 (2012); Manny Schecter, Congress Needs to Act So Alice Doesn't Live Here (in the Patent System) Anymore, IPWATCHDOG (Feb. 13, 2017), https://www.ipwatchdog.com/2017/02/13/congress-needs-to-act-so-alice-doesnt-livehere-in-the-patent-system-anymore/id=78241/ [https://perma.cc/XM79-BGDY].

18. Schecter, supra note 17.

19. USPTO, Subject Matter Eligibility, https://www.uspto.gov/patent/laws-andregulations/examination-policy/subject-matter-eligibility [https://perma.cc/HS7B-A58E] (last visited Feb. 23, 2019); see also Kevin A. Rieffel, Revised MPEP May Provide New Tools in Alice Rejections, IPWATCHDOG (Feb. 4, 2018), http://www.ipwatchdog.com/2018/02/04/revised-mpep-tools-alice-rejections/id=93305/ [https://perma.cc/28KG-TPVQ].

20. See Mark Nowotarski, If You Want to Protect Your Business Method, Reframe It as a Technical Invention, IPWATCHDOG (Sept. 3, 2019), https://www.ipwatchdog.com/2019/09/03/want-protect-business-method-reframetechnical-invention/id=112875/ [https://perma.cc/Y887-APKS].

21. Dolly Krishnaswamy, Hacking Through Patent Thickets, IPWATCHDOG (Sept. 29, 2013), https://www.ipwatchdog.com/2013/09/29/hacking-through-patentthickets/id=45429/ [https://perma.cc/6DBC-KATF].

Originally Published by Colorado Technology Law Journal 10 March, 2020

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