Supreme Court Issues Decision in Alice Corp. v. CLS Bank

Alice Corp. v. CLS Bank International (2014)

By Kevin E. Noonan --

This morning, in Alice Corp. v. CLS Bank, the Supreme affirmed the Federal Circuit's per curiam opinion in CLS Bank v. Alice Corp. in a unanimous opinion by Justice Thomas with a concurring opinion by Justice Sotomayor joined by Justices Breyer and Ginsberg.  The decision appears to be an incremental one, insofar as it does not strike down all software patents and is crafted as an application of the Court's earlier precedent, particularly Bilski v. Kappos and Mayo Collaborative Serv. v. Prometheus Labs.

The decision affirms patent ineligibility for the method claims (directed, according to the Court, to methods for implementing an intermediated settlement that are well-known in the art), system claims involving implementation of the method using a general purpose computer and computer code for directing a general purpose computer to implement the method.  From the opinion, it is clear that the Court is still striving for balance between tying up fundamental building blocks that would inhibit innovation while not swallowing patent law whole because everything ultimately is based on an abstract idea, law of nature or natural phenomenon:

We have "repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of " these  building  blocks of human ingenuity" [quoting O'Reilly v. Morse as cited in Mayo].  "At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law" because "[a]t some level, "all inventions . . . embody, use, reflect, rest upon, or apply laws of  nature, natural phenomena, or  abstract ideas" [citing Mayo].

Accordingly, in applying the §101 exception, we must distinguish between patents that claim the "'buildin[g] block[s]'" of human ingenuity and those that integrate the building blocks into something more, thereby "transform[ing]" them into a patent-eligible invention.  The former "would risk disproportionately tying up the use of the underlying" ideas and are therefore ineligible for patent protection.  The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws" [citing liberally from the Mayo opinion].

The Court considers the Mayo opinion to have provided the framework for performing the patent-eligibility analysis:

First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.  If so, we then ask, "[w]hat else is there in the claims before us?"  To answer that question, we consider 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.  We have described step two of this analysis as a search for an " 'inventive concept'" -- i.e., 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."

The Court also considers its jurisprudence from Gottschalk v. Benson, through Parker v. Flook, Bilski and to Mayo to be consistent in both the underlying principles and how the analysis should be done.  The opinion distinguishes its seemingly contrary decision in Diamond v. Diehr in a way that may be useful in making decisions regarding what is patent-eligible subject matter (and how it should be claimed):  "In other words, the claims in Diehr were patent eligible because they improved an existing technological process, not be­cause they were implemented on a computer" (emphasis added).  And, in a footnote, the Court declares that its Mayo analysis is consistent with the patent law principle that the claims should be considered as a whole because the Mayo decision instructs a court to consider the elements of the claim at issue both individually and as a whole.

The Court's opinion expressly ties its decision here to the decision in Bilski, based on the perceived similarity between attempts in each case to preempt a preexisting human activity (hedging in Bislki, intermediated settlement here) as being abstract ideas (and once again conflating Section 101 with Sections 102 and 103), the Court stating that "[i]t is enough to recognize that there is no meaningful distinc­tion between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.  Both are squarely within the realm of 'abstract ideas' as we have used that term."  And after a brief discussion of the Court's understanding of how a conventional general purpose computer works, the Court opines that how the computer implements the claimed (and ineligible) method is not "enough" to render the system claims patent eligible because said implementation is entirely conventional.

The Court's opinion also provides guidance on how it will determine what is "enough" that must be added to an abstract idea, law of nature or natural phenomenon to render a claim encompassing these categories to be patent-eligible, based on the rubric that there must be something in the claimed invention that improves existing technology:

The method claims do not, for example, purport to improve the functioning of the computer itself.  ("There is no specific or limiting recitation of . . . improved computer technology . . . "); Brief for United States as Amicus Curiae 28–30.  Nor do they effect an improvement in any other technology or technical field.  Instead, the claims at issue amount to "nothing significantly more" than an instruction to apply the ab­stract idea of intermediated settlement using some un­specified, generic computer.  Under our precedents, that is not "enough" to transform an abstract idea into a patent-eligible invention [citations omitted].

The system and computer-readable medium claims stand and fall with the method claims:

Put another way, the system claims are no different from the method claims in substance.  The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea.  This Court has long "warn[ed] . . . against" interpreting §101 in ways that make patent eligibility 'depend simply on the draftsman's art.'"

The Court's decision is entirely consistent with its disinclination to enunciate broad proscriptions against patenting particular areas of technology, as evidenced by its decisions in Bilski (which did not rule all business method claims to be patent-ineligible), Association for Molecular Pathologists v. Myriad Genetics (which was limited to rendering genomic DNA patent-ineligible but did not disturb patent-eligibility for cDNA, and contained express proscriptions against reading the decision to encompass methods or other applications of the knowledge of the BRCA genes, despite the PTO's recent Guidelines that appear to ignore these proscriptions) and even Bowman v. Monsanto, which cautioned against interpreting the Court's decision in that case to apply to all "self-replicating technologies."

Justice Sotomayor's concurring opinion is brief and to the effect that the Justice believes business method patents to be patent ineligible per se because they do not fall within the ambit of a "process" under the Patent Act.  Justices Breyer and Ginsberg join her here, as they did in Justice Stevens' concurring opinion in Bilski.  The other Justices apparently are not yet ready to make all business method claims ineligible for patenting, provided that they satisfy the rule reiterated here that there must be something that improves existing technology or otherwise does not merely adapt methods for controlling human activity for implementation by a computer.

Comments

[Gene Quinn]

Kevin-

How do you account for the fact that the claims in this case are structured in the same way as claims in virtually all software patent cases? If these method claims are patent ineligible, and that makes system claims patent ineligible, what method and systems claims could be allowable under this decision?

I realize the Court didn't say software is not patentable. They didn't even use the word "software" in the decision. But it seems to me that saying these claims are patent ineligible has to mean that similarly constructed method and systems claims will likewise be patent ineligible. I feel certain that is how the USPTO will interpret the case.

-Gene

[Paul Cole]

When this case first came out in the Federal Circuit in 2012 I published a guest posting under the heading CLS Bank v Alice Corporation reveals "A House Divided". I commented:

"Whether the claimed subject matter lies in the reality of patent-eligible subject-matter or is more correctly located in the Wonderland of abstract ideas is an issue that has been debated on both sides of the Pond, and on which the Dodo or the King of Hearts in his judicial capacity would surely have had an opinion if it had been brought to their attention. In the US there appears to be ample scope for further debate."

It is interesting to see how closely the predictions in that posting and the ensuing comments turned into reality, and also the convergence between the European and US view as to what is eligible in the software/business method field.

[Kevin E. Noonan]

Ain't harmonization wonderful? Clearly not.

I realize that the Court has made it difficult if not impossible to uphold the validity of many software patent claims as granted - one of the problems with the Court is its failure to recognize that in its blind efforts to preclude patent eligibility for claims falling within its own created "exceptions" it has no regard for disturbing the settled expectations of the public regarding eligible patent claims. But I think the substantive aspects (as far as they can be discerned) may help.

First, claims reciting methods previously practiced without computers are in the most trouble. But there are many computer-based claims where there was either no method in the prior art because the method requires a computer for implementation or, while the method existed the use of a computer provides qualitatively different (better) outcomes. These are both "technological advances" in the art that should render such claims eligible (and that's as far as my understanding of the computer arts goes, so I can't be more specific).

Second, as with genomic DNA in Myriad the Court had enunciated a clear rule: just performing a method on a general purpose computer will not be enough. This situation reminds me of the spate of cases that arose after KSR relating to making something that had been controlled mechanically into an electromechanical device to achieve the same ends. (I realize the advantages of using 102/103 instead of 101 but the Court has abrogated any distinction between the statutory sections.)

Finally, by affirming the Federal Circuit, particularly in view of how fractured the lower court is, the Supreme Court has likely disincentived any rush to the court when the expected deluge of patent ineligibility cases arises.

What needs to be done is simple: companies that have based their existence on patents have to start supporting academics who will research the position that patenting should should be broadly done on "anything under the sun" that shows evidence that the hand of man was needed to make the invention, and then press their legislators to prevent a massive job loss to overseas competitors by changing patent law to cover at least some of the catagories made ineligible by the Court or the PTO.

Thanks for the comments

[Skeptical]

Dr Noonan,

Should I change my moniker to "Jaded," given your advice, as it appears to be a capitulation on the attack of the patent system from the Left (Academia)?

[Kevin E. Noonan]

The Court is made up of a particular type of person, and that type of person has been influenced throughout their entire lives to believe that academics are disinterested and impartial (as opposed to the parties or amici) as well as people who take a broader approach to policy questions, where the ivory tower is at least in the neighborhood of the Court'r judicial Mt. Olympus. My suggestion, in view of the tendency of the Court to be influenced by academic writing, is to support those in the academy who would point out the inconsistencies with regard to economic reality that the Court's recent decisions have introduced into the patent system.

Thanks for the comment.