Computer-Implemented Inventions and Patent Eligibility: Five Points of Reference for Alice Corp. v. CLS Bank International

March 20, 2014

Patent LawIn the next two weeks you will read an increasing number of misleading headlines about the patentability of “computer software inventions”. The Supreme Court will be hearing the appeal of Alice Corp. v. CLS Bank. The case involves a question whether the computer-implemented inventions in question are directed to patent-eligible subject matter.

Below are five fundamental reference points for understanding this case.

  1. The question presented to the Supreme Court is:
    Whether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?
  2. The patent-eligibility statute – 35 U.S.C. § 101 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.
  3. The patent claims in question relate to:
    A computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate “counterparty” or “settlement” risk.
  4. The reason the case is on appeal to the Supreme Court is because:
    An overwhelming majority of respected legal commentators – indeed the Federal Circuit itself – believe the patent-eligibility statute as applied to computer-implemented inventions is difficult, if not impossible, to consistently apply.
  5. Alice v. CLS is about subject matter patent-eligibility, not patentability

While the terms “patentable” and “patent-eligible” are often used interchangeably by the press, by lawyers and even by the courts, it is essential when discussing patent cases to use these terms precisely.

As the Federal Circuit elaborated in its decision on this case:

As § 101 itself explains, “the ultimate question of patentability turns on whether, in addition to presenting a patent-eligible invention, the inventor also satisfies ‘the conditions and requirements of this title,’ namely, the novelty, nonobviousness, and disclosure requirements of U.S. patent law.”

Patent-eligibility is defined by the statutory language of § 101 cited above. It is additionally-defined by the judicially-created exclusions from patent-eligibility, namely, “[l]aws of nature, natural phenomena, and abstract ideas”.

The question now before the Supreme Court is thus the two-fold test of patent-eligibility:

A)   Whether the computer-implemented inventions of the type contained in the Alice case are processes, machines, manufactures, or composition of matters, or any new and useful improvements thereof.

If no, these computer-implemented inventions are not patent-eligible.

B)   If yes, then the court must answer whether the computer-implemented inventions are within one of the judicially-created exclusions from patent-eligibility, namely whether a computer-implented invention is a law of nature, a natural phenomena, or an abstract idea.

If the answer to B) is no, the Court can rule that computer-implemented inventions of the type asserted in Alice are patent-eligible, or it can add another judicially-created exclusion from patent-eligible subject matter. Or it can do something entirely different.

As discussed by numerous intellectual property legal commentators, a crucial determining factor in this case could be whether the Court separates its analysis of patent-eligibility under §101 from the patentability questions of novelty, nonobviousness, and disclosure.

The Supreme Court is scheduled to hear this case on March 31, 2014.