On June 19, 2014, the U.S. Supreme Court issued a unanimous opinion making it easier for parties to invalidate claims of patents covering computer-implemented inventions. Alice Corporation Pty. v. CLS Bank Int’l, No. 13–298, 2014 U.S. LEXIS 4303 (June 19, 2014).
Abstract ideas are not patentable. Alice Corporation is the assignee of several patents that disclose a scheme for mitigating “settlement risk,” i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. CLS Bank sued Alice, arguing that the patents were invalid. To determine whether the patents were eligible for patent protection, the court applied the two-part test from Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___ (2012). Under this framework, a court is to first determine whether claims are directed to a patent-ineligible abstract concept. If so, the second step is to determine whether the method claims transform the abstract idea into a patent–eligible invention.
Applying the Mayo test, the Court concluded that the claims involved a patent-ineligible concept: the abstract idea of intermediated settlement. The Court then proceeded to the second step in Mayo’s framework––whether the method claims, which merely required generic computer implementation, transformed the abstract idea into a patent–eligible invention. Concluding that the claims did no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer, the Court held that they added nothing of substance to the underlying abstract idea, so they too were patent ineligible.
The Court did provide some guidance on avoiding the outcome of Alice by stating that “an invention is not rendered ineligible for patent simply because it involves an abstract concept.” In distinguishing Diamond v. Diehr, 450 U.S. 175 (1981), where a computer was used to calculate and recalculate cure time for rubber, the Court stated “the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.” The key is the presence or absence of a definitive invention rather than just an abstraction.
The ruling in Alice emphasizes the importance of determining patent eligibility of computer-implemented inventions at the outset. A computer alone will not transform an otherwise patent-ineligible invention into something that is patent eligible; there must be something extra from additional elements that transform the claimed invention into “a new and useful end.”