Business Method and Software Patents in the Aftermath of the U.S. Supreme Court Decision in Alice Corp. v. CLS Bank International

SCOTUSblog looks at the world of patents after the U.S. Supreme Court decision in the Alice v. CLS software business method patent case.

See Monday round-up : SCOTUSblog 

where it is written, inter alia (excerpted, links removed):

"In The National Law Journal’s Supreme Court Brief, Tony Mauro reports on the possibility that ... Alice Corp. v. CLS Bank International ... will “prove to be a turning point in the corporate world’s battle against patent trolls.”  Other coverage ... comes from John Duffy ... Jaclyn Belczyk ... Sandra Park, Rob Merges, Justin Nelson, and David Kappos."

The full original paragraph of the above at SCOTUSblog has links to the respective contributions. Take a lOOk.

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:

• Patent Wars Reach U.S. Supreme Court: Are Computer Implementations of Abstract Ideas Patentable?

• Software Business Patents under United States Supreme Court scrutiny: A Question of Arrows? Alice Corp. v. CLS Bank Int’l (13-298) - Excerpts from the March 31, 2014 Oral Arguments

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

DIRECTIVE 2011/83/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council.

With reference to our immediately preceding posting,
go to this link at EUR-Lex
for the fulll text in the various EU languages
of DIRECTIVE 2011/83/EU
OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2011
on consumer rights,
amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council
and repealing Council Directive 85/577/EEC
and Directive 97/7/EC
of the European Parliament and of the Council.

Massive Landmark Consumer Protection Law Goes Into Effect in the EU (European Union) on Friday the 13th of June 2014 Affecting Many Businesses and Online Presences

People who think that EU administrators and legislators in Brussels do nothing useful better think again.

The pioneer landmark Consumer Rights Directive, which was passed by the European Union (EU) on October 2011, and which required Member States to implement corresponding legislation by December 13, 2013,
goes into effect in the EU tomorrow, Friday the 13th, 2014

The provisions of the Consumer Rights Directive make numerous and in our opinion absolutely necessary wide-sweeping changes to protect consumers and to put an end to many abusive commercial practices, online and offline.

The Consumer Rights Directive thus eliminates hidden charges and costs for online sales, demands disclosure of "total costs" for price transparency, provides for 14-day withdrawal of online purchases and an EU-wide model withdrawal form, requires disclosure of costs for returned goods beforehand, forbids pre-ticked boxes on websites, fixes telephone hotline charges at the low basic rate for telephone calls, eliminates credit card payment surcharges, sets forth stricter rules for the description of digital content offered for sale (software and hardware compatability, copying limitations), and provides common rules for businesses all over Europe.

The details are outlined in a press release issued by EUROPA.EU on June 23, 2011 as follows (links to other languages available here):

"MEMO/11/450
Brussels, 23 June 2011

Consumer Rights:

10 ways the new EU Consumer Rights Directive

will give people stronger rights

when they shop online

Good news for consumers: new EU legislation will strengthen their rights in all 27 Member States. The European Parliament today adopted – by an overwhelming majority (615 for, 16 against, 21 abstentions) – the Consumer Rights Directive, which the European Commission proposed in October 2008 (IP/08/1474). The vote follows a deal reached between the three EU institutions (European Commission, European Parliament and the Council of Ministers), and clears the final hurdle before the new rules can become reality for consumers.

EU Justice Commissioner, Viviane Reding, who already championed consumer-friendly EU rules in 2007 and 2009 to drastically reduce mobile phone roaming charges, said: "This is a good day for Europe’s 500 million consumers. Today's adoption of the new EU Consumer Rights Directive will strengthen consumer rights by outlawing Internet fraudsters who trick people into paying for horoscopes or recipes that appear to be offered for free. Shoppers will no longer be trapped into buying unwanted travel insurance or car rentals when purchasing a ticket online. And everyone will have 14 days if they wish to return goods bought at a distance, whether by internet, post or phone. I would like to thank the European Parliament's rapporteur, Andreas Schwab, as well as the Hungarian EU Presidency, for their committed support and work that made this political breakthrough possible. The European Commission will help ensure that the new rules are implemented swiftly in all Member States so that consumers across Europe can have more confidence when shopping, whether online or offline.”

In today’s vote, the European Parliament backed a political agreement between negotiators of the European Parliament, the Council and the Commission. In March 2010, EU Justice Commissioner Reding made it clear that any agreement on the Directive would require a sound balance between consumers’ interest in stronger rights and businesses’ interest in taking full advantage of the EU's Single Market (see SPEECH/10/91).

Last steps in the legislative procedure:

Formal approval of the agreed text of the EU Consumer Rights Directive by the EU Council of Ministers (September);
Publication of the new Directive in the EU's Official Journal (this autumn);
Transposition of the new rules into the national laws before the end of 2013.

The following are the 10 most important changes for consumers in the new Directive:

1) The proposal will eliminate hidden charges and costs on the Internet

Consumers will be protected against "cost traps" on the Internet. This happens when fraudsters try to trick people into paying for ‘free’ services, such as horoscopes or recipes. From now on, consumers must explicitly confirm that they understand that they have to pay a price.

2) Increased price transparency

Traders have to disclose the total cost of the product or service, as well as any extra fees. Online shoppers will not have to pay charges or other costs if they were not properly informed before they place an order.

3) Banning pre-ticked boxes on websites

When shopping online – for instance buying a plane ticket – you may be offered additional options during the purchase process, such as travel insurance or car rental. These additional services may be offered through so-called ‘pre-ticked’ boxes. Consumers are currently often forced to untick those boxes if they do not want these extra services. With the new Directive, pre-ticked boxes will be banned across the European Union.

4) 14 Days to change your mind on a purchase

The period under which consumers can withdraw from a sales contract is extended to 14 calendar days (compared to the seven days legally prescribed by EU law today). This means that consumers can return the goods for whatever reason if they change their minds.

Extra protection for lack of information: When a seller hasn’t clearly informed the customer about the withdrawal right, the return period will be extended to a year.

Consumers will also be protected and enjoy a right of withdrawal for solicited visits, such as when a trader called beforehand and pressed the consumer to agree to a visit. In addition, a distinction no longer needs to be made between solicited and unsolicited visits; circumvention of the rules will thus be prevented.

The right of withdrawal is extended to online auctions, such as eBay – though goods bought in auctions can only be returned when bought from a professional seller.

The withdrawal period will start from the moment the consumer receives the goods, rather than at the time of conclusion of the contract, which is currently the case. The rules will apply to internet, phone and mail order sales, as well as to sales outside shops, for example on the consumer's doorstep, in the street, at a Tupperware party or during an excursion organised by the trader.

5) Better refund rights

Traders must refund consumers for the product within 14 days of the withdrawal. This includes the costs of delivery. In general, the trader will bear the risk for any damage to goods during transportation, until the consumer takes possession of the goods

6) Introduction of an EU-wide model withdrawal form

Consumers will be provided with a model withdrawal form which they can (but are not obliged to) use if they change their mind and wish to withdraw from a contract concluded at a distance or at the doorstep. This will make it easier and faster to withdraw, wherever you have concluded a contract in the EU.

7) Eliminating surcharges for the use of credit cards and hotlines

Traders will not be able to charge consumers more for paying by credit card (or other means of payment) than what it actually costs the trader to offer such means of payment. Traders who operate telephone hotlines allowing the consumer to contact them in relation to the contract will not be able charge more than the basic telephone rate for the telephone calls.

8) Clearer information on who pays for returning goods

If traders want the consumer to bear the cost of returning goods after they change their mind, they have to clearly inform consumers about that beforehand, otherwise they have to pay for the return themselves. Traders must clearly give at least an estimate of the maximum costs of returning bulky goods bought by internet or mail order, such as a sofa, before the purchase, so consumers can make an informed choice before deciding from whom to buy.

9) Better consumer protection in relation to digital products

Information on digital content will also have to be clearer, including about its compatibility with hardware and software and the application of any technical protection measures, for example limiting the right for the consumers to make copies of the content.

Consumers will have a right to withdraw from purchases of digital content, such as music or video downloads, but only up until the moment the actual downloading process begins.

10) Common rules for businesses will make it easier for them to trade all over Europe.

These include:

A single set of core rules for distance contracts (sales by phone, post or internet) and off-premises contracts (sales away from a company’s premises, such as in the street or the doorstep) in the European Union, creating a level playing field and reducing transaction costs for cross-border traders, especially for sales by internet.

Standard forms will make life easier for businesses: a form to comply with the information requirements on the right of withdrawal;

Specific rules will apply to small businesses and craftsmen, such as a plumber. There will be no right of withdrawal for urgent repairs and maintenance work. Member States may also decide to exempt traders who are requested by consumers to carry out repair and maintenance work in their home of a value below €200 from some of the information requirements."