• The Supreme Court Elaborates on the Concept of Patent Eligibility and Patents Directed to Abstract Ideas
  • July 17, 2014 | Author: Kristin Shusko
  • Law Firm: GrayRobinson, P.A. - Tampa Office
  • In Alice Corp. Pty. Ltd. v. CLS Bank Int’l, the Supreme Court considered whether computer-related patents were patent eligible under 35 U.S.C. § 101 and faced the question of defining an abstract idea. The Court found that generic computer implementation of an abstract idea could not transform that idea into a patent-eligible invention.

    Section 101 of the Patent Act sets out what subject matter is eligible for patent protection and the courts have recognized three well-established exceptions: laws of nature, natural phenomena, and abstract ideas. Prior to Alice, the confusion in the courts was that the test for whether or not a patent was directed to an abstract idea was essentially “know-it-when-you-see-it.” Such a standard is quite unclear and only creates opportunities for vigorous litigation. In Alice Corp., rather than eliminating this “know-it-when-you-see-it” test, the Supreme Court essentially endorsed it.

    Alice Corporation was the assignee of multiple patents that disclosed the management of risk relating to specified but unknown future events. Specifically, the relevant claims related to a computerized scheme for mitigating settlement risk. All of the claims of the patent required implementation by a computer. CLS Bank International and CLS Services Ltd. operate a network that enables currency transactions and sued Alice for declaratory judgment of invalidity and non-infringement of the patents at issue.

    On summary judgment, the district court held that the claims asserted were patent ineligible as directed toward abstract ideas. The Federal Circuit affirmed the judgment using a two-part test set out in Mayo Collaborative Services v, Prometheus Laboratories, by first identifying the abstract idea and then determining if the remainder of the claim adds “significantly more.” Step two of the analysis requires courts to consider the additional elements of the claim individually and as a whole to determine if they transform the nature of the claim. In the patents-at-issue in Alice, the Federal Circuit concluded that the implementation of a computer did not add anything substantial to the abstract idea.

    On appeal, the Court followed the two-step test of Mayo and first found the idea of intermediated settlement to be abstract because it was a concept that had long been prevalent in commerce. Next, the Court considered the method claims of the patents, which required generic computer implementation, and found that this implementation failed to transform the abstract idea of intermediated settlement into patent-eligible subject matter. In this analysis, the Court considered whether the method claims provided additional features that would supply a new and useful application of the abstract idea and held that patent claims directed to abstract ideas do not become patent eligible by the “mere recitation” of generic computer elements. With regard to the patents at issue, the use of a computer did not add anything to the abstract idea; hence it was ineligible subject matter, thereby opening the door for more challenges to computer-related patents.