Source: http://www.kinney.com/blog/2014/11/01/patent-eligibility-under-alice/
Timestamp: 2019-04-21 00:24:45+00:00

Document:
On June 19, 2014, the Supreme Court issued a unanimous decision in Alice Corporation v. CLS Bank International, No. 13-2988 (U.S., June 19, 2014), holding all claims in patents for a computer-implemented scheme for mitigating settlement risk invalid as drawn to an abstract idea, ineligible for patent protection under 35 U.S.C. §101. The Court revisited prior case law to reaffirm that a generic computer and generic instructions are insufficient to transform an abstract idea into a patent eligible invention, but declined to further define the contours of what constitutes an abstract idea. Notably, the Court solidified its previous guidance for analyzing claims for subject matter eligibility. According to the Court, the two-part framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc. 556 U.S. ____, 132 S. Ct. 1289 (2012) for analyzing claims directed to patent ineligible laws of nature and natural phenomena is to be applied to all judicial exceptions, including abstract ideas, and all categories of claims (e.g., product and process). Under this framework, the Court first determines if the claims are directed to a patent-ineligible concept and, if so, then determines if the additional elements transform the patent-ineligible concept into a patent-eligible application—a step the Court describes as a search for an “inventive concept.” How this guidance will be practically implemented by the United States Patent and Trademark Office (USPTO), as particularly applied to business methods and software, is yet to be seen, but a closer look at the Alice opinion, the Preliminary Examination Instructions issued by the USPTO and related public comments may shed some light on what to expect.
The patents at issue in Alice claimed a method for exchanging financial obligations between two parties, a computer-based system for carrying out the method, and a computer-readable medium containing program code to enable a computer to perform the method. The concept, as articulated by the court, is intermediated settlement—a process that involves a third party (computer) to mitigate the risk that only one party will satisfy their financial obligation in an agreed-upon exchange with another party. In other words, Alice Corp. claimed a computer-based escrow arrangement. Respondents CLS Bank International et al., who facilitate currency transactions across a global network, filed suit seeking declaratory judgment that the claims were invalid, unenforceable, or not infringed. Alice Corporation filed a counterclaim alleging infringement. The District Court held all claims ineligible for patent protection under §101 as directed to an abstract idea. A divided en banc Federal Circuit affirmed, but failed to agree on the appropriate test to adopt and whether nuances existed depending on whether the invention claims a method, system, or article.
In Bilski v. Kappos, 561 U.S. 593 (2010), the Court expanded this category to include “a fundamental economic practice long prevalent in our system of commerce,” holding the concept of risk hedging unpatentable. In Alice, the Court distinguished such longstanding commercial practice from a fundamental truth that has always existed. The former is “a method of organizing human activity,” not a principle that exists apart from human action. This was the extent of the Court’s guidance, however. Satisfied in finding that “there is no meaningful distinction” between the concept of intermediary settlement at issue in Alice and risk hedging at issue in Bilski, but to the chagrin of many observers, the Court found no need to “labor to delimit the precise contours of the “abstract ideas” category in this case.” Thus, the category remains limited to those few examples that have been tested.
In analyzing the second step, the Court found that the computer components of the method, individually and as a combination, were insufficient to transform the ineligible concept into a patent-eligible invention. Applying past precedent, the Court stated, “each step does no more than require a generic computer to perform generic computer functions” (“‘well-understood, routine, conventional activit[ies]’ previously known in industry”) The Court added that the method claims “do not . . . purport to improve the functioning of the computer itself . . . [n]or do they effect an improvement in any other technology or technical field.” The Court made the same argument for the system and computer-readable medium claims, concluding that absent such limitations, the addition of a generic computer with generic instructions is insufficient to satisfy the second step of the Mayo framework.
Less than a week after the decision, the USPTO issued its Preliminary Examination Instructions in view of Alice. Following the Court’s guidance, the USPTO established that the two-part framework of Mayo—originally applied only to claims involving laws of nature and natural phenomena—should be extended to abstract ideas and both process and product claims. This, the instructions note, is a change from, and supersedes, prior USPTO guidance, including that applied after Bilski, which states that a claim may be patenable if it is limited to a particular practical application (how it is applied in the real world) and not merely the result achieved, and provides separate detailed guidance and factors to be considered for analyzing products and methods claims (MPEP 2106(II)(A) and (B), respectively).
Public comments to the preliminary instructions note an insufficiency in guidance for identifying an abstract concept in Part 1. For instance, the USPTO does not provide definitions for the examples they recite, or even the Court’s own limiting language (e.g., language limiting “fundamental economic practices” to those that are “long prevalent in our system of commerce” or “taught in any introductory finance class”). The USPTO includes “[c]ertain methods of organizing human activities,” but fails to note that the Court used this to describe a longstanding commercial practice, not as a separate and additional example of an abstract idea. Others note with concern the oversimplification of the two-part framework and ask that the USPTO recognize that prior guidance of Bilski remains viable.
In principle, Alice added very little to the substantive law. It confirmed that fundamental economic practices are unpatentable abstract ideas absent elements that transform them into significantly more; that generic computers, instructions, and functions are insufficient for this purpose; and that improvements to the computer itself, another technology, or technical field may be required. According to the USPTO, Alice “neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.” Memo from Andrew H. Hirshfeld, Dep’y Comm. for Patent Examination Policy, USPTO, “Preliminary Examination Instructions in view of the Supreme Court Decisions in Alice Corp. v. CLS Bank Int.,” June 25, 2014. Yet, since Alice, there has been a surge in invalidations under §101. Even though Alice added little to the substantive law, practitioners should expect a change in the patent evaluation process, as well as an emboldened court and USPTO.

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