This alert was updated on June 27, 2014.
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 a memo to Examining Corps regarding 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.
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Kenneth K. Suh
Justin E. Gray
San Diego, California
Pavan K. Agarwal
Jeanne M. Gills
Cynthia J. Rigsby
Courtenay C. Brinckerhoff
George C. Beck