The U.S. Supreme Court's decision in Alice Corp. v. CLS Bank Int'l has effectively shut the door on obtaining patent protection for conventional business methods implemented on a computer. However, the decision leaves open the possibility of obtaining patent protection on computer-implemented methods that involve an "inventive concept."
The Court has long held that a patent must not stifle innovation by monopolizing an abstract idea. Therefore, patents that claim the building blocks of human ingenuity, which are ineligible for patent protection, must be distinguished from patents that integrate the building blocks into something more, thereby transforming them into a patent-eligible invention.
To guide this analysis, the Court provided the following framework:
- Do the patent claims involve an abstract idea?
- If so, "what else is there in the claims?" If the claims are written so as to ensure that the patent amounts to significantly more than a patent on the underlying abstract idea, the claims are patent eligible.
Applying this framework to Alice's patents on a computer-implemented scheme for mitigating settlement risk using a third-party intermediary, the Court held the claims were directed to the abstract idea of intermediated settlement (which is a known fundamental economic practice), and the use of a generic computer to perform the intermediated settlement method was not enough to transform the abstract idea into a patent-eligible invention.
Importantly, the Court stated "there is no dispute" that many inventions implemented using a computer are eligible for patent protection. The question is whether the patent claims only cover an abstract idea implemented on a computer or instead supply the "inventive concept" needed to make the transformation into a patent-eligible invention.
This decision will likely be cheered by technology companies with patent portfolios directed to more sophisticated inventions that go beyond computer-implemented business methods. However, software patents directed to general business processes, such as those that involve the performance of well-known financial transactions on a computer, may be in jeopardy of being invalidated.