Clarified or Confused? SCOTUS Decision in Alice v. CLS Bank and Continued Mystification of Abstract Ideas

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By Chris Ferrell

On June 19th, the Supreme Court ruled on its sixth and final patent law case of this term, Alice Corp. v. CLS Bank. The case concerned the patentability of claims covering a computerized trading platform for exchanging financial obligations. The business method patents at issue in Alice were directed to a computer-implemented scheme for mitigating settlement risk in certain financial transactions. The claims included a method, a computer-readable medium, and a system. The key issue for the Court was to identify an appropriate test for determining whether a computer-related invention is an application of an abstract idea. In a unanimous decision authored by Justice Thomas, the Court held that Alice’s claims were not patent eligible under 35 U.S.C. § 101 because they were directed at an abstract idea of intermediated settlement. While the decision was not a surprise to some in the industry, others waited on baited breath to see just how far the Court would go in analyzing these software claims, and to what extent patent analysis would be moving forward. In previous cases, including Mayo Collaborative Services v. Prometheus Labs, Bowman v. Monsanto and Association for Molecular Pathology v. Myriad Genetics, the Court took the opportunity to reign in overbroad positions in patent law and define the outer-boundaries of patentability; Alice was no different. However, in trying to contain patent law, the Court may have muddied the waters even more for those trying to decipher what may be patentable, especially in the realm of computer software.

Adapting its earlier analysis from Mayo, the Court held that § 101 patentability analysis has two parts: (1) determining whether the claim at issue is directed towards an abstract idea; and (2) analyzing each element of the claim, both individually and as a whole, and deciding whether the claim contains some “inventive concept” that transforms the abstract idea into a patent-eligible idea. Although it appears the Court articulated a simple two-part test, the analysis for patentability remains somewhat murky. Some authors believe that the Alice analysis will lead to a welcomed constraint on so-called “patent trolls,” limiting overbroad, poor-quality software patents. Others look at the longer-term, practical effects of the Alice ruling on future patentability issues.

In his article, Go ask Alice- what can you patent after Alice v. CLS Bank?, author Rob Merges highlights some of the challenges in applying the court’s two-partanalysis, including the long-term, practical effects this ruling will have in the patent industry. Merges argues that the first prong requires a determination of abstractness, yet the Court did not expressly define what it means to be abstract. Although the Court has previously defined patentability and sufficiently constrained patentability in Bilskiv. Kappos and Gottschalk v. Benson, these definitions fail to provide guidance and thus, the definition of abstract remains a mystery. Merges argues that the second prong, which requires that the claim contains some “inventive concept,” presents fewer challenges than the first prong. Under the second prong, “software can be patented as long as it is new (see: hardware)” and more than just a rehash of another idea. In sum, this decision may reign in long-disputed analyses used by the Federal Circuit and bring welcome relief to those hoping for a heightened software patentability standard. It could also lead to more difficult decisions of what is patentable and what is considered a mere abstract idea.

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