Thursday, June 19, 2014

Alice In Patentland

The United States Supreme Court handed down its decision in Alice Corporation v. CLS Bank International et al. today, June 19, 2014.  Alice Corporation ("Alice") owns United States Patent Nos. 5,970,479, 6,912,510, 7,149,720, and 7,725,375, which the Court describes as
disclos[ing] a scheme for mitigating “settlement risk,” i.e.,the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. In particular, the patent claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediary. The patents in suit claim (1) a method for exchangingfinancial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.
CLS Bank International et al. ("CLS Bank"),
who operate a global network that facilitates currency transactions, filed suit against petitioner, arguing that the patent claims at issue are invalid, unenforceable, or not infringed. Petitioner counterclaimed, alleging infringement.  After Bilski v. Kappos, 561 U.S. 593, was decided, the District Court held that all of the claims were ineligible for patent protection under 35 U.S.C. §101 because they are directed to an abstract idea. The en banc Federal Circuit affirmed.
The Court found that "the claims at issue are directed to the abstract idea of intermediated settlement."  It further found "that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention."  The Court also considered the patent-eligibility of "system" claims, deciding that
the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer;  the system claims recite a handful of generic computer components configured to implement the same idea.
Claims involving computer-readable media were also held unpatentable.

A concurrence by Justice Sotomayor, joined by Justices Ginsburg and Breyer, suggested that claims merely to methods of doing business do not qualify as patentable under the "process" category of 35 U.S.C. §101, and cited the proposition that "processes for organizing human activity" are similarly unpatentable.

The Alice Corporation v. CLS Bank International et al. decision marks the latest in a remarkable series of patent law cases considered by the Supreme Court.  One result is an apparent narrowing of patent subject matter especially relevant to inventions involving algorithms, computer implementation, naturally-occurring chemicals, and medical diagnostic methods.  Determining the precise boundaries of patentability remains devilishly challenging, but the recent trend in Supreme Court's patent jurisprudence appears to head towards a relatively more restrictive view of patent-eligiblity.