Thursday, June 19, 2014

Software and Business Method Patents Limited by Unanimous U.S. Supreme Court Holding in Alice Corp. v. CLS Bank International

“If everybody minded their own business, the world would go around a great deal faster than it does.”
Lewis Carroll, Alice in Wonderland

The U.S. Supreme Court has issued a unanimous opinion in the long-awaited business method software patents case Alice Corp v. CLS Bank International, No. 13-298 and has restored some of our otherwise waning faith in the wisdom of that Supreme Court.

Our sister site LawPundit posted about this case previously inter alia at:
The Supreme Court's holding is recited at the very beginning of the opinion, written excellently and understandably by Justice Thomas, as follows:
"The patents at issue in this case disclose a computer-implemented scheme 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. The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention."
Justice Sotomayor also wrote a very short concurring opinion, joined by Justice Ginsburg and Justice Breyer, stating:
"I adhere to the view that any “claim that merely describes a method of doing business does not qualify as a ‘process’ under §101.” Bilski v. Kappos, 561 U. S. 593, 614  (2010) (Stevens, J., concurring in judgment); see also In re Bilski, 545 F. 3d 943, 972 (CA Fed. 2008) (Dyk, J., concurring) (“There is no suggestion in any of th[e] early [English] consideration of process patents that processes for organizing human activity were or ever had been patentable”). As in Bilski, however, I further believe that the method claims at issue are drawn to an abstract idea. Cf. 561 U. S., at 619 (opinion of Stevens, J.). I therefore join the opinion of the Court."
The Supreme Court in making its unanimous opinion relies heavily on the precedents found in Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U. S. ___, ___ (2013), Bilski v. Kappos, 561 U. S. 593, S. Ct. 3218 (2010) and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012), by holding:
  • that laws of nature, natural phenomena, and abstract ideas are not patentable,”
  • that "the concept of intermediated settlement" was an abstract idea, and
  • that method claims merely requiring generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.
As Justice Thomas writes:
"[T]he mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention."
The general law applicable to patents and patent eligibility is thus recited by Justice Thomas as follows (excerpted from the slip opinion):
"Section 101 of the Patent Act defines the subject matter eligible for patent protection. It provides:
"Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”" 35 U. S. C. §101.
“"We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.”" Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U. S. ___, ___ (2013) (slip op., at 11) (internal quotation marks and brackets omitted). We have interpreted §101 and its predecessors in light of this exception for more than 150 years. Bilski, supra, at 601-–602; see also O'Reilly v. Morse, 15 How. 62, 112-–120 (1854); Le Roy v. Tatham, 14 How. 156, 174-–175 (1853).
We have described the concern that drives this exclusionary principle as one of pre-emption. See, e.g., Bilski, supra, at 611-–612 (upholding the patent “"would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea”). Laws of nature, natural phenomena, and abstract ideas are " ' "“the basic tools of scientific and technological work.”" ' " Myriad, supra, at ___ (slip op., at 11). "“[M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it,"” thereby thwarting the primary object of the patent laws. Mayo, supra, at ___ (slip op., at 2); see U. S. Const., Art. I, §8, cl. 8 (Congress “"shall have Power . . . To promote the Progress of Science and useful Arts"”). We have “"repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of" ”these building blocks of human ingenuity. Mayo, supra, at ___ (slip op., at 16) (citing Morse, supra, at 113).
At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. Mayo, 566 U. S., at ___ (slip op., at 2).  At some level, "“all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Id., at ___ (slip op., at 2). Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U. S. 175, 187 (1981). "“[A]pplication[s]”" of such concepts “‘"to a new and useful end",’ ”we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).
Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “" '‘buildin[g] block[s]' "’ ”of human ingenuity and those that integrate the building blocks into something more, Mayo, 566 U. S., at ___ (slip op., at 20), thereby “transform[ing]” them into a patent-eligible invention, id., at ___ (slip op., at 3).  The former "“would risk disproportionately tying up the use of the underlying"” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws."
For more details of the unanimous Supreme Court opinion, especially as regards:
"... a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts"
go to Alice Corp v. CLS Bank International, No. 13-298.


News media have of course reported the decision, e.g. at:

New York Times -- Adam Liptak -- Supreme Court Rules Against Alice Corp. in Patent Case

Wall Street Journal --  Brent Kendall -- Supreme Court Sides With CLS Bank by Tossing Forex Software Patents
USA Today -- Richard Wolf -- Supreme Court cuts back on software patents

Forbes -- Daniel Fisher -- Saying 'Do It On A Computer' Not Enough To Save Patent, Supreme Court Rules

NPR -- Krishnadev Calamur -- Supreme Court Rules Against Patents For Abstract Ideas

Bloomberg -- Greg Stohr and Susan Decker -- Software Patent Protection Curbed by U.S. Supreme Court

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