Yesterday, the U.S. Supreme Court issued its decision in the Alice Corp. Pty. Ltd. v. CLS Bank Int’l case, which we have been following throughout previous blog posts. In its unanimous decision, the Supreme Court held that “abstract ideas” implemented by a computer are not eligible for patent protection.
The patents at issue in the case included method, system and media claims directed to a computer-implemented process for mitigating settlement risk (i.e., the risk that only one party to a financial transaction will pay what it owes) by using a third-party intermediary.
In the first step of the Mayo framework, the Court concluded that the concept of intermediated settlement is an “abstract idea.” In doing so, the Court made a comparison to the concept of risk hedging, which was at issue in the Bilski case. However, the Court did not provide any other substantive guidance regarding the definition of an “abstract idea.” In the second step of the Mayo framework, the Court concluded that “merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”
The Court found all of the claims, including the method, system and media claims, to be invalid. In the 17-page decision written by Justice Thomas, the Court stated “[because petitioner’s system and media claims add nothing of substance to the underlying abstract idea, we hold that they too are patent ineligible under §101,” thereby signaling that the Court was more focused on the substance of the claims, as opposed to the form of the claims. Accordingly, strategically drafting claims in the form of system and media claims, such as Beauregard claims, is insufficient to transform an “abstract idea” into a patent-eligible invention. To further this point, the Court stated “[t]his Court has long ‘warn[ed] . . . against’ interpreting §101 ‘in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”
While the decision will likely put the validity of many software patents in question, it did not render all software inventions, particularly those involving more concrete processes, ineligible for patent protection. The full impact of the decision and its interpretation by the Federal Circuit will not be known for some time.