Alice Corporation Pty. Ltd. v. CLS Bank International (573 U.S.    (2014))

In a long awaited decision, the Supreme Court has determined that Alice Corporation’s patents covering a computer implemented scheme for mitigating settlement risk do not claim patent-eligible subject matter. The Court concluded that the claims are “drawn to the abstract idea of intermediated settlement, and … merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.” (slip op., at 1). The decision reiterates previous law that held that abstract ideas that are merely implemented on a computer do not transform that idea into patentable subject matter.

The Court indicated that the goal of the patent-eligibility analysis is to “distinguish between patents that claim the ‘buildin[g] block[s]’ of human ingenuity and those that integrate the building blocks into something more.” (slip op., at 6 – internal citations omitted). The two part test the Court applied, involved determining: first “whether the claims at issue are directed to one of those patent-ineligible concepts;” and if so, considering the elements of each claim both individually and “as an ordered combination,” to determine whether the additional elements “transform the nature of the claim into a patent-eligible application.” (slip op., at 7).

For the first step, the Court found the claims are directed to an abstract idea akin to the claims in Bilski. “Like the risk hedging in Bilski, the concept of intermediated settlement is ‘a fundamental economic practice long prevalent in our system of commerce.’” (slip op., at 9). For the second step, the Court noted that the method claims “merely require generic computer implementation” and “fail to transform that abstract idea into a patent-eligible invention.” (slip op., at 9).

At first blush, the decision seems to do little to move current precedent regarding abstract ideas – namely that overly broad claims with no technical or structural implementation will not be saved by mere recitation of computer structure. Due to public policy concerns, broad patents will be barred which are directed to abstract concepts that are merely implemented on a computer. However, the two part test is troubling as there is no clear instruction from the Court as to what makes up an “abstract idea.” Although the Court has specifically stated “we tread carefully in construing this exclusionary principle lest it swallow all of patent law,” (slip op., at 6) almost any claim is subject to being reduced to an abstract idea. Outside financial management, the opinion offers little or no guidance on determining whether a claim is abstract and therefore must transform the abstract idea to be eligible.

Meeting the second element of the test is even more problematic. By negative inference, claims that add something more “not already present when the steps are considered separately,” “improve the functioning of the computer itself,” “improve computer technology,” or improve “any other technology or technical field” would meet the transformation requirement. (See slip op., at 15). This requirement may be interpreted as being analogous to European practice, which requires a technical effect for patent-eligibility. Subsequent decisions to Alice will need to define what is an abstract idea, and will need to provide examples of sufficiently transformative claims.

To prepare for these subsequent decisions, it may be wise to consider drafting a comprehensive specification and numerous claims of a smaller scale, so that no one claim covers (and thus risks preempting) the entire idea. It may also be prudent to express claims as a number of technical features rather than expressing the general concept in a single claim. Because the §101 analysis is conducted on a claim-by-claim basis, this approach should help even where the claim set as a whole covers the bulk of the idea. There may also be advantages to defining the problem to be solved in the specification more broadly than any one claim purports to resolve, so that no claim appears to preempt others from working to solve the problem.

In the case where a claim risks covering an abstract idea, it may be recommended to include technology-related limitation in the claim that relates to a novel aspect such that the computer-related limitation is novel and non-obvious as well. The one prior case cited in Alice Corp. in which a claim covering the use of patent-ineligible subject matter was found nevertheless to be eligible was saved because the additional subject matter of the claim involved a physical, technological element – the use of a thermocouple to record temperature measurements inside a rubber-curing mold – was “something the industry had not been able to obtain.” In other words, this added feature qualified as an inventive concept because it was novel, not because it was statutorily patent-eligible subject matter. This, coupled with the language used by the Court in other § 101 cases, makes clear that there must be something novel, as opposed to simply patent-eligible, in the remainder of the claim to render it allowable, where the claim is otherwise primarily directed to ineligible subject matter.

Although further decisions will likely provide more detail on the breadth of the abstract idea test, proactive steps are required now that focus claims on the technical features of an invention and that ensure preemption is not an issue.