AIPPI World Intellectual Property Congress, Toronto Workshop V Patenting computer implemented inventions Wednesday, September 17, 2014 Implications of Alice Corp. v. CLS Bank (United States Supreme Court June 19, 2014) Philip C. Swain Foley Hoag LLP 155 Seaport Boulevard Boston, MA 02210 (617) 832-1150 (617) 832-7000 (fax) (617) 365-4844 (cell)
United States Supreme Court Ruling Provided Narrow Guidance on Patent-Eligibility Questions for Computer and Software Patents In Alice Corp. Pty. Ltd. v. CLS Bank Int l, et al., No. 13-298, U.S., 134 S. Ct. 2347, 2014 WL 2765283, 110 U.S.P.Q.2d 1976 (2014), a case that many in the patent community hoped would bring some clarity to the difficult issue of which types of computerimplemented inventions should be eligible for patent protection, the United States Supreme Court provided some narrow additional guidance on what sort of computer-implemented inventions and software are eligible for patent protection in the United States. The issues raised in the Alice case could have affected the patent eligibility of hundreds of thousands of software and other computer-implemented patents, as well as many patents claiming telecommunications, financial, and business method inventions. Instead, the Supreme Court issued a unanimous, but narrow decision, which invalidated the patents in the case because they claimed an abstract idea. Unfortunately, the decision provided little meaningful clarification on how lower courts and the United States Patent Office should go about determining when an invention claims an abstract idea. This suggests that patent validity challenges for abstractness will continue to be a frequent issue in litigation and in the patent application process. Section 101 of the US patent statute allows inventors to seek patents in four broad categories of subject matter: processes, machines, manufactures, and compositions of matter. In past decisions, the Supreme Court has further refined those categories by holding that inventions covering only laws of nature, natural phenomena, or abstract ideas are excluded from eligibility for patent protection. Nevertheless, the subject matter eligibility test has historically served only as a coarse filter in the patenting process, because the inventions claimed in patent applications are also subject to additional requirements novelty, non-obviousness, and the requirement for adequate disclosure of the invention in the patent. However, based on a number of recent Supreme Court cases in this area, more courts have begun to rely upon the requirement of subject matter eligibility to invalidate patents, - 2 -
particularly in the areas of computer-implemented inventions and biotechnology. The Supreme Court s invalidation of the patents at issue in Alice v. CLS Bank marks a continuation of this recent trend in expanding the use of section 101 as a substantive patent filter. Prior decisions of the trial courts and Court of Appeals On May 24, 2007, CLS Bank filed a lawsuit against Alice Corp. in the federal district court in Washington, D.C. seeking a declaratory judgment that four of Alice s existing patents were invalid because they claimed patent-ineligible subject matter under section 101. Alice s disputed patent claims included (1) methods for exchanging financial obligations, (2) a computer-readable storage medium containing program code to direct financial exchanges, and (3) a computer system comprising a computer and data storage to carry out the method in such exchanges. The district court granted summary judgment for CLS Bank, finding that Alice s method claim was merely directed to the abstract idea of intermediated settlement and that the physical components of Alice s remaining claims were no more than simple mechanical embodiments of that idea. A three-judge panel of the U.S. Court of Appeals for the Federal Circuit reversed that decision; however, the complete twelve-judge Federal Circuit, sitting en banc, reaffirmed the district court. In a split decision, the twelve-judge court authored seven separate opinions none of which provided a consensus explanation for whether the claims were directed to patent-eligible subject matter under section 101. The Supreme Court granted certiorari. The Supreme Court decision In Alice Corp. Pty. Ltd. v. CLS Bank Int l, et al. (2014), a unanimous decision by Justice Thomas, the Supreme Court held that all of Alice s contested patent claims were invalid because they were directed to the abstract idea of intermediated settlement in financial transactions. The Court reasoned that merely requiring generic computer implementation of that abstract idea failed to transform it into a patent-eligible invention. - 3 -
The Court used a test that it had articulated in Mayo Collaborative Services v. Prometheus Labs, Inc. (2012), which requires that a patent claim s elements be considered both individually and as an ordered combination in order to decide whether they are directed to a patent-eligible application. In applying this test, the Court determined that Alice s claims were, in essence, drawn to the abstract idea of intermediated settlement, implemented on a generic computer. Considering each claim element individually, the Court determined that each step of the claimed invention merely required a generic computer to perform generic computer functions. These steps did not, therefore, contain a sufficiently inventive concept to transform the claimed abstract idea into a patent-eligible application of that idea. Further, the Court noted that considering the claimed steps as an ordered combination added nothing that was not already present when the steps were considered separately such as improving the functioning of the computer itself or effecting an improvement to the technology or technical field. In sum, the principle holding in Alice is that an invention that uses an unspecified, generic computer to implement an old, abstract idea will not be eligible for patenting. The Court did not articulate any broad new principles that would help the courts or the Patent Office decide whether an idea is abstract. More importantly, perhaps, the Court s application of the Section 101 patent eligibility test in Alice continued a line of reasoning from the Court s decision in Mayo, which conflated subject matter eligibility under section 101 with the concepts of novelty and non-obviousness ( inventiveness ) that are enumerated and have historically been considered separately under sections 102 and 103 as criteria for patentability under the patent statute. Implications of Alice Corp. v. CLS for patent litigation This ruling has done little to clarify how the courts and the Patent Office should determine when a patent claim covers an ineligible abstract idea. Therefore, patent owners will continue to face validity challenges under section 101 for both computer and software patents, as - 4 -
well as against business, financial method, life science and other technical inventions. For computer-implemented inventions, the most likely strategy for defeating these validity challenges will be to show that the invention requires something more than using a generic computer to implement a claimed concept, and if possible, improves the functioning of the computer itself. Implications of Alice Corp. v. CLS for patent prosecution In seeking patents on computer implemented inventions, it would appear that the claims which are most likely to pass the patenteligibility test will be those that claim some sort of novel result beyond the use of a generic computer to implement an old idea or those that effect the improvement of an existing technology or technological process. US Patent Office Guidance on Preliminary Examination Instructions of Patent Eligibility for Computer-Implemented Abstract Ideas A week after the United States Supreme Court s decision in the Alice Corp. case, the U.S. Patent and Trademark Office issued a memo to examiners on how to review patents that attempted to take into account Supreme Court's Alice Corp. ruling that computerized abstract ideas are not patent-eligible. Significantly, the memo did explicitly state that software can still be patented. However, the memo explains that patent claims covering abstract ideas implemented using a computer are patent-eligible only if they claim "significantly more" than the idea itself, such as an improvement in computer technology. Notably, Alice Corp. 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. This statement about the lack of a per se rule is a clear message to examiners that software patent claims are still patenteligible, even if they will be somewhat harder to get allowed. - 5 -
The memo instructs examiners to use two-part analysis. The first step is to determine whether the claim is directed to an abstract idea. While Supreme Court has not specified what sort of claim would be an abstract idea, the memo notes examples would include fundamental economic processes, methods of organizing human activities, mathematical formulas or simply an idea of itself. If the claims include an abstract idea, the examiner should then determine whether the claims when considered as a whole include something significantly more than the idea itself, in which case they are patenteligible, the memo said. For example, improvements to technology or the function of a computer could constitute something significantly more, as could meaningful limitations beyond linking the use of the idea to a particular technological environment. But mere instructions to apply the idea on a computer or use a computer to perform routine, conventional activities are not enough. Finally, the memo said that even if the application is rejected for claiming an abstract idea, examiners should still determine whether the application meets the other requirements of patentability, such as whether it is rendered anticipated or unpatentably obvious by prior art. AIPLA comments on US Patent Office Guidance for Examiners concerning Alice v CLS Bank On July 31, 2014, the American Intellectual Property Law Association (AIPLA), of which the AIPPI-US Group is a division, sent detailed comments to the US Patent Office on its guidance to examiners concerning patent eligibility after Alice v CLS Bank. The AIPLA commended the Patent Office for issuing the guidance to examiners. But it expressed its concern that the guidance exceeded the scope of the Supreme Court opinion, in a way that would cause examiners to err on the side of granting few or no software patents (in fact, some observers have commented that result is precisely what seems to be happening to recent software patent applications). - 6 -
For example, the AIPLA pointed out the Supreme Court opinion in Alice introduced no new legal principles for applying the abstract idea exception to patent eligibility. Instead, the Supreme Court pointed out that the claims at issue in Alice for intermediated settlement in financial transactions were similar to the claims for risk hedging that the Court had found to be ineligible for abstractness four years ago in Bilski v Kappos, 130 S. Ct. 3218 (2010). Thus, the Alice case did not require any major changes in the Patent Office s current examination guidance on patent eligible subject matter. The AIPLA also warned against the Patent Office s suggestion in the preliminary instructions that all claims directed to laws of nature, natural phenomena, and abstract idea should now be analyzed according to the two-step framework explained by the Supreme Court in Alice (and originally set forth by the Supreme Court in a case concerning medical diagnostic tools, Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S., 132 S. Ct. 1289 (2012). The Supreme Court in Alice did not say that the two-step framework (which does import the inventive concept requirement into the patent eligibility analysis) is the only way of analyzing a patent claim for eligibility. For example, after the Bilski decision in 2010, the Patent Office published interim guidelines for determining eligibility that still endorsed the use of the Federal Circuit s machine-or-transformation test as a useful, but not exclusive, test for determining patent eligibility. The AIPLA expressly suggested that examiners should be instructed to err on the side of finding eligible subject matter, and to apply the abstract exceptions judiciously. Examiners should provide evidence and clear reasoning to support a conclusion that a claim is directed to an abstract idea. The AIPLA expressly warned the Patent Office to tread carefully, to avoid allowing the construction of the exclusionary principle of the abstract ide to swallow all of patent law. Alice, 573 U.S. (citing Diamond v. Chakrabarty, 447 U.S. 303 (1980)). The AIPLA s comments emphasized that the claims should be - 7 -
analyzed as a whole, rather than separately analyzing parts of each claim. And examiners should be given concrete examples from case law as to what is and is not an abstract idea, rather than urging them to extend or add to the narrow pool of ineligible subject matter. IPO comments on the PTO Guidelines The Intellectual Property Owners Association (IPO ), a trade association representing over 200 companies and 12,000 individuals in all industries and fields of technology who own or are interested in intellectual property rights, also provided comments on the Patent Office s preliminary examination instructions in view of the Alice v CLS decision. The IPO began is comments by reiterating four main themes that it had pointed out in its amicus brief to the Supreme Court in the Alice case. First, patent eligibility for computer-implemented inventions is vital to IPO members and the broader U.S. economy. Second, nearly every economic sector depends on computer-implemented innovations that improve products and services, increase productivity and efficiency, and strengthen competitiveness. Third, the patentability of new and useful technological advancements should not be constrained by overbroad subject matter rejections. Fourth, a higher standard of patentability should not be imposed for computer-implemented inventions than is applied to innovations in other technological fields. The IPO then made two principal suggestions in detail. The Patent Office final instructions should require examiners to make a detailed prima facie showing that each part of the two-part test prescribed in Alice/Mayo for determining patent-ineligible subject matter has been met. The instructions should tell examiners how to evaluate whether a claim is directed to an abstract idea (part 1), and how not to conflate section 101 of the patent statute with sections 102-8 -
(novelty) and 103 (nonobviousness). Then the instructions should tell examiners how to evaluate part 2, whether the claim amounts to significantly more than the abstract idea, including evaluating criteria such as the presence of an inventive concept sufficient to transform the claimed abstract idea into a patent eligible application ; additional features to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea ; application[s] of such concepts to a new and useful end remain eligible for patent protection ; and distinguish[ing] between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more, thereby transforming them into a patent-eligible invention. Alice (citations omitted). The second main suggestion made by the IPO was that examiners should be instructed that the presence of a generic or conventional computer in a claim should not be used as a basis for rejecting every such claim as directed to an abstract idea. Finally, the IPO warned that examiners should be reminded not to focus on issues of patent ineligibility, to the detriment of other patent eligibility requirements. Ultramercial v. WildTangent: The next big case on patent eligibility of computer implemented inventions A three-judge panel of the United States Court of Appeals for the Federal Circuit will soon decide whether Ultramercial s patent on a method of viewing ads online is patentable subject matter. Previously, the Federal Circuit had held that the patent was not invalid because it concerned complex computer programming, reversing a trial court decision that the patent was invalid because it claimed an abstract idea. But the Supreme Corp. remanded the case back to the Federal Circuit for reconsideration in the wake of its Alice Corp. decision in June. In WildTangent s brief on remand, filed in late August, 2014, WildTangent argued that the Ultramercial patent, which covers a method of requiring web users to view ads in order to access - 9 -
copyrighted online video content, is invalid as an abstract idea because that basic concept of using advertising as a form of currency is a fundamental economic practice, like the computerized method of managing risk in financial trading that was invalidated in the Alice Corp. case. Ultramercial s brief on remand, also filed in late August, 2014, argued that the patent introduced a paradigm shift in the way companies monetized copyrighted content, and was detailed and pathbreaking in disclosing a way to prevent viewers from seeing the content they wanted until they watched an ad. WildTangent s artificial notion of reducing the claimed invention to the concept of using advertising as currency is not an appropriate way to evaluate patents under the Alice decision, and would threaten scores of process patents. Three amicus briefs addressing the issue on remand were also filed with the Federal Circuit in late August. An oral argument will probably be scheduled by the Federal Circuit some time (but not necessarily) within the next several months, and a decision by the panel will likely come out several months after that. Conclusion Many in the United States hoped that the Alice case would end up clarifying the law on the patent eligibility of software. Instead, it appears that the law will continue to evolve incrementally. Unless the Supreme Court or the Federal Circuit is able to provide clear guidance for the courts and the Patent Office on how to determine when a software or computer-imputer implemented invention comprises an abstract idea, or one of those courts reverts back to the patent statute and declares that any invention that is useful meets the eligibility requirement, the law in this area will continue to be murky. - 10 -