Supreme Court Issues a New Ruling on Subject Matter Eligibility

June 27, 2014

Patent Law Alice Corp. Pty. Ltd. v. CLS Bank Intern. dealt with patents directed to methods and systems for using a computer system to lessen the settlement risk of financial instrument trades.  A majority of the Federal Circuit (717 F.3d 1269, 106 U.S.P.Q.2d 1696 (Fed. Cir. 2013)) found the method and computer-readable-media claims to be directed to ineligible subject matter, and an equally divided court found the same for the system claims.

On appeal, the Supreme Court affirmed (2014 WL 2765283 (2014)).  The Court followed the two-step framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  Under that framework, courts are first to determine whether the claims are directed to patent-ineligible concepts.  Second, courts should ask, “What else is there in the claims before us?”  To do that, the court considers “the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.”

In CLS Bank, the Court first held that the claims at issue were “drawn to the abstract idea of intermediated settlement.”  Writing for the Court, Justice Thomas stated:

[W]e need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.

Expert Witness bannerNext, the Court looked at whether the elements of the claims contained an “inventive concept” that transformed the claimed abstract idea into an application that was patent-eligible.  The Court reviewed the analyses in Mayo, Flook, and Diehr and held that “[t]hese cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea ‘while adding the words “apply it”’ is not enough for patent eligibility.” The Court noted that merely introducing a computer into the claims does not change the second step of the Mayo analysis.

In this case, the method claims did nothing more than instruct the practitioner to execute the abstract idea of intermediated settlement with a generic computer.  Whether looking at the method claim elements separately or considering the computer components of the method “as an ordered combination”, the Court could not escape the conclusion that the claims amounted to “‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.”

The computer system and computer-readable medium claims were held to be unpatentable for the same reasons.

The day after the decision, the PTO issued Preliminary Examination Instructions in view of the Supreme Court Decision in Alice Corp. Pty. Ltd. v. CLS Bank International et al., which state that the PTO will now be applying the Mayo analysis framework to all types of judicial exceptions and all categories of claims.