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September 18, 2014Published Article

The Supreme Court and the tricky issue of software patents

biztimes.com

Prior to adjourning for the summer, the United States Supreme Court rendered an opinion relating to the patent eligibility of computer-implemented inventions. In Alice Corp. v. CLS Bank International, the Court held that all claims of a patent owned by Alice Corp., including method, system, and computer-readable medium claims, are drawn to an abstract idea and, therefore, are not patent-eligible. The opinion is one in a recent series of cases addressing patent eligibility.
Inventors and patent attorneys often asked themselves if their invention is truly new and is it non-obvious in view of what others have done. But before that, there is a bigger threshold question that needs to be asked. Is the thing itself even patent eligible? In Alice, the issues before by the Supreme Court were whether the subject matter of the claims in the Alice Corp. patent falls within the set of things defined by patent law as being eligible for patent protection and whether the claimed subject matter falls within the judicially-created exception that bars protection of abstract ideas.

The claims at issue relate to computerized methods and systems for mitigating financial settlement risks between parties using a third-party intermediary. The Court held that the claims were drawn to the abstract idea of intermediated settlement and that implementing the abstract idea on a generic computer failed to transform the abstract idea into patent-eligible subject matter.

In the opinion, the Court recognized the need to distinguish between patents that claim the “building blocks” of human ingenuity and those that integrate the building blocks into something more, which transforms the invention into patent-eligible subject matter. The Court relied heavily on a 2012 decision, Mayo Collaborative Services v. Prometheus Laboratories, in analyzing the method claims at issue. As set forth in Mayo, the first step of analysis includes determining whether the claims at issue are directed to a patent-ineligible concept, such as a law of nature, a natural phenomenon, or an abstract idea. With respect to Alice Corp.'s claims, the Court held that the claims were drawn to the concept of intermediated settlement, which it considered to be a “building block of the modern economy.” In keeping with yet another recent decision, Bilski v. Kappos (2010), the Court concluded that the current claims at issue were directed to an “abstract idea.” The Court noted that it was using the similarity between the Bilski claims and the Alice Corp.'s claims to hold that the claims were drawn to an abstract idea. However, the Court declined to provide a precise definition for “abstract ideas.”

The Supreme Court did provide some guidance, albeit brief, on how to avoid claiming abstract subject matter. Among other possible strategies, when software innovators seek patent protection they should attempt to describe:
• Ways in which their innovations are applied to devices and processes that provide solutions to particular “technological problem[s]” and
• “Applications” of their innovations to “useful end[s]”.

From a more practical perspective, providing technical details regarding how a computer-implemented invention works will also help in reducing the chance that the invention will be viewed as abstract.

Moving to the second step of the Mayo framework, the Court considered whether the elements of the claims contain an “inventive concept” sufficient to “transform” the claimed abstract idea into patent-eligible subject matter. The Court concluded that the “mere recitation of a generic computer cannot transform a patent-ineligible abstract into a patent-eligible invention.” Accordingly, the court held that the functions performed by a computer recited in the claims (e.g., obtaining data, adjusting account balance, and issuing automated instructions) were “purely conventional” computer functions. Furthermore, the Court concluded that the generic computer components recited in Alice Corp.'s system claims were not enough to transform the underlying abstract idea into patent-eligible subject matter.

Unlike the claims at issue in Bilski that included only method claims, the Alice Corp. claims included system claims and computer-readable medium claims. The Court, however, held that system and computer-readable medium claims were no different in substance from the method claims. Therefore, the Court held that these claims were also ineligible for patent protection.

Innovation and Patent Trolls
The Alice ruling has been viewed favorably by some, particularly constituencies that are concerned with so-called “patent trolls.” This is because many patents asserted by patent trolls relate to computer-implemented technologies. Thus, the feeling among some constituencies is that the Alice ruling will provide a basis to challenge patents being asserted by patent trolls. The Alice ruling will undoubtedly have an impact in some validity challenges.

Less discussed is the potential impact that the Alice ruling may have on software and computer innovators. Clearly, the Alice ruling does not declare software ineligible for patent protection. The case does not even mention the word software. However, software can be naturally abstract and this characteristic of software may clash with the court's concerns that abstract concepts not be protected by patents.

Another unstated aspect of the Alice ruling is that past U.S. Patent Office guidelines indicated that “software per se” was not eligible for patent protection. In other words, the software had to be part of something else, such as a system or be stored on a physical thing, such as drive or disk. These prior guidelines were often used as the impetus for claiming software innovations as instructions stored on a computer readable medium or as a computer-implemented system. The Alice ruling indicates that system and computer-readable medium claims will not be treated differently simply or solely because such claims are not directed to a process or method.

Hardware innovations, even in devices that have existed for decades continue to be made and the eligibility of these innovations for patent protection is generally not in question. Of course such innovations are subject to scrutiny for novelty and non-obviousness. Computer-implemented innovations, which branched off from hardware, however, are still something that patent applicants, the courts, and the Patent Office appear to struggle with when addressing the threshold question of patent eligibility.

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