In June 2014, the Supreme Court struck down a patent on a software implemented invention, perhaps narrowing the scope of software patents we will see in the future.
In June 2014, the Supreme Court struck down a patent on a software implemented invention, perhaps narrowing the scope of software patents we will see in the future.

The Supreme Court, Patent Eligibility, and “Abstract Ideas”

In June 2014, the Supreme Court issued a much-anticipated patent decision in Alice Corp. v. CLS Bank. The question was whether the claims at issue, involving a method for mitigating “settlement risk” between two parties in a financial exchange by using a computer system as an intermediary, are patent-eligible under 35 U.S.C. § 101. Justice Thomas, writing for a unanimous court, answered that question with a definitive “no.” But even though this particular computer-implemented method was struck down, are other software programs still eligible for patent protection? That’s a trickier question.

35 U.S.C. § 101 limits patentable subject matter to “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Laws & products of nature, physical phenomena, and abstract ideas are generally considered unpatentable subject matter. With the rise of software and software-based inventions, the line between abstract ideas and new and useful processes became somewhat unclear. Note that §101 addresses whether a particle technology is eligible for patent protection. Section 101 does not address whether an invention is new, nonobvious, useful, or sufficiently described. Those requirements are addressed in separate sections of the Patent Act and represent their own unique hurdles to patentability. Therefore, the question presented by §101 (and addressed in the Alice case) is, even assuming a particular invention is new, nonobvious, useful, and sufficiently described, is this the type of creation that should be considered for the powerful protection of a patent.

For a time, courts generally refused to invalidate software patent claims under the statutory language of § 101. In 2010, however, the Supreme Court unanimously held, in Bilski v. Kappos, that a patent claiming a software method for financial hedging against price fluctuations was invalid under § 101. Alice continued this line of decisions for the Court, confirming the Supreme Court’s position that “basic tools of scientific and technological work” should not be monopolized by a patent-holder. Alice communicated to lower courts that § 101 should be used to invalidate software and business methods that are so abstract that the award of a patent would “tend to impede innovation more than it would tend to promote it.”

In order to accomplish this goal, Alice puts forth a two-part framework, based on its previous decisions in Bilski and Mayo v. Prometheus, to determine whether a patent application describes an “abstract idea,” and if so, whether it still contains enough inventive material to meet the § 101 standard.

First, the court considers whether the patent claim is “directed to an abstract idea.” While on some level, every invention embodies at least one abstract idea, if the claimed idea is so broad such that awarding a patent would impede more innovation than promote it, it is likely to meet this first step. Examples of abstract ideas include fundamental economic practices like the ones at issue in Alice and Bilski, certain methods of organizing human activities, an idea of itself, and mathematical relationships/formulas.

Second, if the patent claim is directed to an abstract idea, the court examines whether anything in the patent “transform(s) that abstract idea into a patent-eligible invention. In other words, if there are features of the invention that go above and beyond simply implementing an abstract idea in software, it may still be patent-eligible. Improvements to the technology, improvements to the functioning of the computer elements and other “meaningful limitations” that go beyond simply implementing an idea on a computer are likely to qualify an invention in this way.

 The End of Patents for Generic Ideas Implemented on a Computer

The U.S. Patent and Trademark Office (PTO) took little time in heeding the new guidance from the Supreme Court. Less than a week after the Alice decision, the PTO issued new guidance to its examiners in applying the Alice decision. PTO examiners now employ the two-part test set forth in Alice to evaluate potentially abstract ideas, and if there are no “meaningful limitations” on an otherwise abstract idea, the PTO examiner is very likely to reject the application as non-patentable subject matter under § 101.

Similarly, courts have wasted no time in implementing the Supreme Court’s guidance. The U.S. Court of Appeals for the Federal Circuit, which receives all appeals on patent matters, has invoked Alice in a number of recent cases to invalidate software and business method patents. District Courts hearing patent disputes, too, have seized the opportunity to invalidate claims that are too “abstract” to be patented. Some recent examples of inventions too “abstract” to be protected by a patent under the Alice rationale include:

  • “[A] process of organizing information through mathematical correlations and is not tied to a specific structure or machine . . . taking two data sets and combining them into a single data set” Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014)
  • “[C]reating a contractual relationship—a ‘transaction performance guaranty’—that is beyond question of ancient lineage,” implemented by a generic computer. buySAFE, Inc. v. Google, Inc., 2014 U.S. App. LEXIS 16987 (Fed. Cir. Sept. 3, 2014)
  • “[M]ethods and systems for ‘managing a game of Bingo,’ . . . ‘solv[ing a] tampering problem and also minimiz[ing] other security risks’ during bingo ticket purchases” using a computer. Planet Bingo, LLC v. VKGS LLC, 2014 U.S. App. LEXIS 16412 (Fed. Cir. Aug. 26, 2014)
  • “[A] computer program that allows the user to create meals from a database of food objects according to his or her preferences and dietary goals, to change those meals by adding or subtracting food objects, and to view the dietary impact of changes to those meals on a visual display” DietGoal Innovations LLC v. Bravo Media LLC (Div. of NBC Universal Media, LLC), 2014 U.S. Dist. LEXIS 92484 (S.D.N.Y. July 8, 2014)
  • “[A]sking someone whether they want to perform a task, and if they do, waiting for them to complete it, and if they do not, asking someone else. . . . performed ‘in connection with a computer system.’” Eclipse IP LLC v. McKinley Equip. Corp., 2014 U.S. Dist. LEXIS 125529 (C.D. Cal. Sept. 4, 2014).

So what does all of this mean for an entrepreneur with a potential software invention? Check out Part 2 of this series.