SCOTUS Tightens Patent Standards for Computer-Implemented Inventions

At a time when patent application filings and litigation proceedings for computer-implemented inventions have reached all-time highs, this summer the U.S. Supreme Court issued a highly anticipated opinion addressing the eligibility of such inventions for patent protection. With an eye toward restoring balance between promoting innovation and rewarding creativity, the Court unanimously held in Alice Corporation Pty. Ltd v. CLS Bank International, et al., 573 U.S. _ (2014) (Alice), that claims directed to generically implementing a computer as an intermediary to mitigate financial settlement risk – are to an abstract idea, and thus not patent-eligible under 35 U.S.C. §101. This article discusses key  takeaways drawn from the Court’s opinion.

Analyze Patent Subject Matter Eligibility Using Mayo Framework

In Alice, the Court relied on the two-step framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. _ (2012) (Mayo) to analyze the patent eligibility of process and product claims directed to an abstract idea. In each step of that framework, the Court considered a claim’s elements individually and in combination.

The first step requires determining whether a claim is directed to a patent-ineligible concept. While Section 101 of the Patent Act provides patent eligibility for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof,” the Court noted a long-standing implicit exception to laws of nature, natural phenomena, and abstract ideas, referring to Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. _ (2013) and Bilski v. Kappos, 561 U.S. 593 (2010)  (Bilski).

If the claim is directed to a patent-ineligible concept, then the second step of the framework applies. Step two involves determining whether the claim contains sufficient content to ensure that it amounts to significantly more than the abstract idea itself.

Infer What Constitutes an Abstract Idea From Examples

Regarding the first step of the framework and patent-ineligible concepts, the Court did not specifically delineate the parameters of what constitutes an abstract idea. Instead, the Court identified cases in which claims were directed to abstract ideas. These include: hedging against the risk of price fluctuations in Bilski; converting numbers from decimal to binary form using an algorithm in  Gottschalk v. Benson, 409 U.S. 63 (1972); computing alarm limits in a catalytic conversion process with a mathematical formula in Parker v. Flook, 437 U.S. 584 (1978); and providing intermediated settlement or escrow in Alice. Accordingly, abstract ideas may include fundamental economic and longstanding commercial practices, mathematical equations and formulas, algorithms, and methods of  organizing human activity. These examples provide some context for assessing what may comprise an abstract idea.

Abstract Idea Plus Significantly More May Equal Patent Eligibility

The rationale for excluding laws of nature, natural phenomena, and abstract ideas from patent eligibility stems from the principle that such concepts serve as the building blocks for scientific and technological innovation, and encourage  competitive development. The Court noted, however, that a claim involving patent-ineligible subject matter, such as an abstract idea, is not per se precluded, referring to Diamond v. Diehr, 450 U.S. 175 (1981). As reflected in the second step of the Mayo framework, if there is an inventive concept that transforms an abstract idea into significantly more, then a claim may be patenteligible. According to the Court’s opinion in Alice, this may be achieved by improving the functioning of the computer itself, improving any other technology or technical field (referring to Diehr), or by a meaningful limitation beyond generally linking the use of an abstract idea to a particular technological environment. Ideally, an invention’s contribution to knowledge in the technical field should be  commensurate with the exclusivity rights that a patent would bestow.

Increase in Patent Quality and Specificity May Decrease Patent  Trolling

Following Alice, there should be less activity from patent assertion entities (PAEs), more commonly known as “patent trolls.” In general, patent trolls don’t exploit their patents through manufacturing a product or implementing a process. Instead, their business model involves acquiring a slew of  bargainbasement priced patents with broad-based claims — the validity of which are often questionable because they are generically directed to abstract ideas, have vague limitations, or overuse functional language (reciting what something does instead of what it is) — and then threatening or suing a third party for alleged infringement of those patents in the hopes of extracting license or  settlement fees.

Patent troll activity is high when it comes to computer-implemented inventions. But that is likely to change given the landmark ruling in Alice that linking the generic use of a computer with an otherwise patent-ineligible concept, does not make a claim patent-eligible under 35 U.S.C. §101. Effectively a corrective  measure, it raises the standards for securing patents for computer-implemented inventions. By requiring more claim specificity, patent quality should increase. And higher quality patents should help minimize the ammunition available for patent trolls.

Mala Sahai is Principal of Alchemy IP & Tech Counsel
San Francisco
415 854-0074; ms@alchemyip.com

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