United States: Supreme Court Sends Computer-Implemented Business Method Claims Down The Rabbit Hole

The US Supreme Court has maintained its solidarity with yet another 9-0 patent decision in Alice Corporation v. CLS Bank1, holding that Alice's patent claims directed towards mitigation of settlement risk were patent-ineligible subject matter. The Court criticized the claims, finding that they merely required generic computer implementation of an abstract idea.

The representative claim was directed towards a method of mitigating risk and required four discrete steps: 1) creation of shadow credit and debit records; 2) obtaining a balance for the shadow records; 3) adjustment of shadow records when transactions requiring an exchange obligation occurred; and 4) instructing exchanges of credits or debits based on the adjustments. Additional claims were directed toward computer systems to carry out the described method and a computer readable medium containing program code to perform the described method. All claims were deemed patent-ineligible subject matter.

The Court made clear that "an invention is not rendered ineligible for patent simply because it involves an abstract concept."2 Rather, it is the failure to transform an abstract idea that renders an invention patent-ineligible. The Court likened abstract ideas to building blocks; claims directed towards the building blocks are not patentable, but inventions that integrate the building blocks into something more are patent-eligible.

Applying a test from Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012), the Supreme Court laid out a framework for patent-eligibility in a two-part test: Are the claims at issue directed towards a patent-ineligible concept? And, if so, is there an element or combination of elements that is "sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself [?]"3 Here, the Court found that the claims on their face were drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk and that the concept of intermediated settlement fell "squarely within the realm of 'abstract ideas.'"4 The Court then walked through its prior patent eligibility cases - Mayo, Benson, Flook, Diehr, and Bilski - describing how each of those cases was decided on the second prong of the inquiry. A summary of the analysis of this case law in shown here:

  Is claim directed to a patent-ineligible concept? Does the claim contain an inventive concept sufficient to transform the claim to a patent-eligible concept? KEY
Mayo Yes No Simply appending conventional steps, specified at a high level of generality was not enough to supply an inventive concept.
Yes No Simply implementing a mathematical principle on a physical machine, namely a computer, is not a patentable application of that principle.
Yes No Patenting abstract ideas cannot be circumvented by attempting to limit the use of the idea to a particular technological environment.
Yes Yes Using a patent-ineligible formula in a process designed to solve a technological problem (i.e. improving an existing process) transformed it into a patent-eligible concept.
Bilski5 Yes No Claims directed towards abstract ideas such as hedging risks, just like the algorithms in Benson and Flook are patent ineligible subject matter.
Alice Yes No The claim elements do nothing more than simply instruct the practitioner to implement the abstract idea on a generic computer using known technology in conventional manner.

Diehr was the only cited precedent having patent-eligible subject matter because the claims applied an abstract idea to improve an existing technological process. The Court relied on the remaining cases to show that the use of a computer cannot turn an otherwise patent-ineligible abstract idea into patent eligible subject matter. The Court concluded that the claims at issue did nothing more than instruct a computer to apply an abstract idea of intermediated settlement using a generic computer. Each of the claim steps simply required a generic computer to perform well known, generic functions, which did not transform the abstract idea into something patent-eligible.

This decision provides litigants additional ammunition to attack computer implemented claims. Those asserting computer-implemented or method claims need to be prepared for the attack by identifying why the computer is integral to the purpose of the invention and explaining how an abstract idea is being used to build something more in the claims. However, while the decision seems fairly far reaching, there still may be patentable space in this arena. There still may be hope for claims directed to computer implemented inventions, where the claims are drafted in a manner that recites how the computer is integral to achieving the purpose of the invention rather than just implementing an abstract idea.


1 Slip Op., June 19, 2014.

2 Slip Op. at 6. The Court did not explain why the recitations of various steps did not render the claims a non-abstract specific implementation of intermediated settlement, other than dismiss it as similar to the Bilski decision.

3 Slip Op. at 7 (internal citations omitted).

4 Slip Op. at 10.

5 The claim in Bilski were also directed to mitigation of risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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