In what may be a big step towards clarifying the patentability of software, the Supreme Court issued its unanimous decision in Alice Corporation v. CLS Bank on June 19, 2014. The Court upheld the Federal Circuit’s invalidation of Alice Corporation’s software patents, including patents directed to a computer system and a computer-readable medium containing program code. The patents are invalid because they covered abstract ideas, which are not eligible for patent protection. The addition of tangible computer hardware was not enough to save these patents.

The underlying method performed by the claimed computer system or program was a method for minimizing settlement risk in transactions. The method itself was considered to be ineligible for patent protection as an abstract idea. However, Alice maintained that the specific, tangible machine (i.e., a computer implementing the method) in the claims made them patent-eligible. 

The Supreme Court referred back to its 2013 decision in Mayo v. Prometheus which established the analytical framework for determining whether a patent covers ineligible subject matter, i.e., laws of nature, natural phenomena, or abstract ideas. First, a court decides whether the claims are directed to patent-ineligible subject matter. If so, then a court looks at what else is in the claim to determine if the additional elements add an “inventive concept” to the claim(s).  An inventive concept must amount to significantly more than a patent on the ineligible subject matter itself.

Applying that framework to Alice’s patents, the Court first determined that the claims were drawn to the abstract idea of intermediated settlement (the use of a third-party intermediary to mitigate settlement risk). Next, the Court decided that the claims failed to add an inventive concept because they merely required generic computer implementation. Therefore, the patents were invalid.

This case may be most notable for its extensive background. Initially, The trial court held the patents invalid. On appeal, a panel of the Federal Circuit reversed the trial court, but the case was then re-heard by all of the Federal Circuit judges. This en banc hearing resulted in a very divided plurality opinion that the patents were invalid.

In contrast to the Federal Circuit’s apparent struggle to decide this case, the Supreme Court decision was unanimous. The unanimity of the Supreme Court decision can be interpreted as a signal to the Federal Circuit that this case is clearer than they seemed to make it.

The Court reviewed several of its well-known patentable subject matter cases and stated broadly that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a  patent-eligible invention.”

In essence, the fatal flaws in Alice’s patents seems to have been that they combined an abstract idea with a generic computer implementations. In other cases, where the underlying method or process is more than an abstract idea, computer implementation may not be fatal to the validity of the patent(s). However, it is clear from this decision that broad recitations of general computer systems does nothing to help a patent.