8 Points on the US Supreme Court Decision Alice v CLS Bank

1. This decision was seen as the Supreme Court’s opportunity to comment on whether software is patentable. However that does not seem to have happened and the word ‘software’ is not mentioned in the decision at all.

2. The patent at issue concerned a computer-implemented scheme for mitigating ‘settlement risk’ (the risk that only one party in financial transaction will pay what it owes) by using a third-party intermediary. The claims are directed to a method carried out on a computer, a computer system configured to carry out the method and a computer-readable medium. The Supreme Court decided all the claims were to an abstract idea and merely requiring generic computer implementation was not enough to make them patent eligible.

3. The history of the case is that the District Court found all the claims to be patent ineligible as they were directed to the abstract idea of ‘employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk’. A Federal Circuit Court reversed the ruling. An en banc Federal Circuit hearing affirmed the District Court’s view, but seven different opinions were given. Dissenting opinions were of the view that only the system claims were patent eligible or all the claims were patent eligible.

4. The Supreme Court relies heavily on the Bilski, Mayo and Myriad cases. Quoting Mayo they state that patent law cannot be used to tie up the ‘building blocks of human ingenuity’.

5. The Court refers to the framework provided in Mayo which first determines whether the claims are directed to a patent ineligible concept and then asks ‘what else is there in the claims before us?’. This second step is the search for an inventive concept, something that ensures the patent amounts to ‘significantly’ more than the ineligible concept.

6. In the Court’s analysis the claims are directed to the abstract idea of intermediated settlement which is a known economic practice. The Court took the view this is as much an abstract idea as was the method in Bilski (for hedging against the financial risk of price fluctuations). The Court decided it did not need to go further to set out the ‘contours’ of the abstract ideas category.

7. The Court went on to conclude that the additional elements of implementation on a generic computer system do not transform the abstract idea into a patent eligible one. At this point the Court quoted Mayo saying that the method of determining metabolite levels was well known in the art, seeing the use of a computer in the present case as similarly insufficient to give patent eligibility. Benson and Flook were also quoted to support the conclusion that eligibility cannot be gained simply by limiting use to a ‘particular technological environment’. A contrast was made to Diehr where the specific method of recording the temperature made the claim eligible, not the computer implementation. The claims in Diehr were seen to improve on ‘an existing technological process’.

8. The Court’s analysis found each step of the computer-implemented method claim to be conventional, and no ‘improvement’ of the computer or a technology occurs. That was insufficient to give patent eligibility and the same applied to the computer system and computer-readable medium claims, with the Court quoting from Mayo which warned against making patent eligibility ‘depend simply on the draftsman’s art’.

The decision is available here.

Commentary on the decision is available at: Patently-O (see here), IPWatchdog (see here) and Patent Docs (see here). IPWatchdog has criticised the decision most stating that it has rendered most software patents invalid. It takes the view that patent applications will now need to be drafted to include much more details of the computer device used to implement the invention. Patent Docs takes the view that bad cases make bad law and this was an ‘extreme’ case which led to the wrong approach being used, i.e. eligibility rather than novelty and non-obviousness.

In our view the decision continues the Supreme Court’s blurring of eligibility with novelty and non-obviousness, the word ‘conventional’ being used often in the Court’s reasoning . In addition the decision needs to be seen in the context of perceptions that too many invalid patents are being granted to computer-implemented inventions and the problem of patent trolls.

[Update on 23 June 14: Patently-O has gathered together different reactions to the decision - see here]

[Update on 24 June 14: IPKat article now available here. New Patently-O article available here.]

You may also wish to see related articles 10 Points on the New USPTO Myriad/Mayo Guidelines on Patent Eligible Matter and 10 Points on What Patent Judgments Achieve.