“Alice” and the Ensuing Rabbit Hole for Patents

Date: October 30, 2014

The United States’ patent system has become a popular target for criticism with some claiming that far too many obvious products and methods are being patented, while others contend that the Patent Office is far too restrictive in issuing patents. The only thing that each side can agree on is that the system appears broken.  However, fixing the problem to the satisfaction of all will not be easy.

In that vein, the Supreme Court and Congress have spent the past few years attempting to find a balance between the need for a strong patent system that protects and encourages innovation and the effects that rapid advances in technology have on that system. As the issue continues to seesaw, the latest standard on what is subject to patent protection as it applies to software related inventions was provided by the Supreme Court in its recent opinion in Alice Corp. v. CLS Bank Int’l.  This series of articles will focus on the fallout generated from the new precedent established by this decision.

Alice Corp V. CLS Bank International: Breaking down the decision.

At a high level, the Court’s opinion is rather simple, and fairly non-controversial:  patent protection is not available for abstract ideas even when those ideas are implemented through the use of a computer.  In short, in order to be patent eligible an invention must itself advance the state of the art in a particular field by performing more than simply implementing an otherwise abstract and known idea through the use of a computer.  In practice this decision will have far reaching effects on not only the issuance of patents in the future, but also the enforceability of patents already issued.

In this particular case, Alice Corp. owned several patents directed to computer programs designed to assist in the mitigation of financial settlement risks.  The Court summarized the claim at issue as “(1) a method for exchanging financial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.”  Alice Corp argued that its software implemented method was not claiming an abstract idea as it was implemented by a computer, and thus, met the Federal Circuit’s “machine or transformation” test.

The Supreme Court held that courts must first determine whether the invention at issue is related to an abstract idea, a law of nature, or natural phenomena.  If so, the court must evaluate each element of the claim separately, as well as the claim as a whole, to determine if the combination of elements is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”  In the view of the Court, implementing an abstract idea in a general purpose computer is not “significantly” more than the abstract idea itself, and thus, such claims are not subject to patent protection.  In other words, merely implementing an abstract idea by way of a computer does not permit the idea to be the subject of patent protection.

The implementation of an abstract idea may be sufficient to permit patent protection if it solves a technological problem in a particular industry as it would advance the state of the art as opposed to merely taking a known process and implementing it in a general purpose computer. In its reasoning, the Court appears to be implicitly adopting the European standard for software patent protection where inventions must show a specific technical effect in order to be granted patent protection. The Court explained that nothing in the Alice Corp. patent claims “purport to improve the functioning of the computer itself…[n]or do they effect an improvement in any other technology or technical field.” 

The case has already made waves. Among the more notable of which is the very high profile and big dollar dispute continuing between heavyweights Samsung and Apple. Just after the Alice decision, Samsung filed a motion requesting that particular claims within two Apple patents be held invalid. This came just two months after Samsung had been ordered to pay Apple $119 million after being found to have infringed on these same patents.

This is likely the beginning of a trend that should encourage inventors to clearly point out how their inventions provide a technological advancement over the prior art, whether improving the computer in which they are implemented or the process that the software implements. Alice provides a new barometer for applicants, as they will now need to more carefully review the claims in their applications with counsel to ensure that that they are directed toward this description of what represents technological advancement.


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