U.S. Supreme Court Addresses Eligibility of Computer-Implemented Patents

On June 19, 2014 the U.S. Supreme Court rendered a decision that will directly affect soŌware related patents. While the ruling addressed a parƟcular case, it will influence numerous decisions in the lower courts as well as the Patent Office. The case, enƟtled ALICE CORP. PTY. LTD. V. CLS BANK INTERNATIONAL, ET AL., is a patent infringement suit wherein Alice CorporaƟon’s (“Alice Corp”) patents claimed: (1) a method of exchanging obligaƟons; (2) a computer system configured to carry out the above method; and (3) a computerreadable medium containing program code for performing the method. All of the claims were implemented using a computer. CLS Bank InternaƟonal (“CLS Bank”) operated a global network incorporaƟng such methods to facilitate currency transacƟons. CLS Bank brought suit against Alice Corp, seeking a declaraƟon that the patents were invalid; Alice Corp countersued for infringement. Although the Court found it unnecessary to define the “precise contours of the ‘abstract ideas’ category,” it unanimously held that Alice Corp’s claims were each drawn to an “abstract idea.” The Court held that there is a two-step approach for assessing whether a claim is directed to patent ineligible subject maƩer. First, the Court must determine if the claim in issue is directed to one of the implicit excepƟons from patent-eligible subject maƩer (i.e. laws of nature, natural phenomena, or abstract ideas). If so, the Court then asks if the claim elements, considered both individually and “as an ordered combinaƟon,” transform the nature of the claim into a patent-eligible applicaƟon. Applying this approach, the Court stated that the method claims were directed to the abstract idea of intermediated seƩlement, i.e. using a third party (in this instance, the computer) to miƟgate seƩlement risk. The Court then found that the method claims did no more than simply provide an instrucƟon to implement the abstract idea of intermediated seƩlement on a generic computer, staƟng the invenƟon did not improve the funcƟonality of the computer or effect an improvement in any other technology or technical field. Based on this reasoning, the method claims failed to transform the abstract idea into a patent-eligible invenƟon. The remaining claims were found to recite a handful of generic computer components implemenƟng the same idea. The Alice Corp patents were ruled invalid. The Court’s ruling is consistent with recent public backlash against certain non-pracƟcing enƟƟes, or “Patent Trolls”. A Patent Troll is a person or company who does not actually manufacture or supply products based upon the patents they own, but rather enforces the patents against accused infringers in an aƩempt to collect licensing fees. The ruling, however, could impact the Trolls’ targets as well as the Trolls themselves. Though the Court speaks in general terms about what consƟtutes patentable subject maƩer, it does not provide specific limitaƟons or examples to define it. Thus, some of the same technology companies who have been frequently targeted by Patent Trolls need to be concerned that their own computer-implemented patents may be brought into quesƟon. Only Ɵme will tell how the Patent Office will rule on future patent applicaƟons. It is assured that if the invenƟon employs a computer-implemented process, the Patent Office will criƟcally scruƟnize the patent applicaƟon. It is our opinion that should the inventor lack a tangible product during the patent prosecuƟon stage, the inventor could be viewed as a Troll by the Examiner, which could affect the subjecƟve reasoning of the Examiner during prosecuƟon. The lower courts will also have various interpretaƟons of this ruling as they apply it in other cases dealing with patent validity of computerimplemented methods. In summary, inventors must now expect greater scruƟny of patents and patent applicaƟons in the U.S. for soŌware/computer-implemented methods.

By Michael Slavin & Brian Taillon