US Supreme Court sends Alice down the rabbit hole!

The US Supreme Court has handed down a unanimous ruling in the Alice Corp v. CLS Bank case¹.

The Court has found the method claims of Alice’s patents to be directed toward an abstract idea of reducing settlement risk by effecting trade through a third-party intermediary and held that the generic use of a computer to implement the abstract idea does not add “significantly more” to render the abstract idea patent eligible within the meaning of 35 U.S.C §101.

The system and media claims were also held to be patent ineligible under 35 U.S.C §101 on the grounds that they are no different in substance from the method claims.

In arriving at this conclusion, the Court applied the framework set out in Mayo² of first determining whether the claim is directed towards laws of nature, natural phenomena and abstract ideas, and second determining whether the claim includes any additional elements or an “inventive concept” which might “transform the nature of the claim” into patent-eligible subject matter.

The Court has not provided any guidance on what constitutes an “abstract idea”. Instead, the Court has relied on the similarities between the concept of intermediated settlement of the claims and the concept of risk hedging in Bilski³ to conclude that “Both are squarely within the realm of “abstract ideas””.

The Court found that the method claims lacked an “inventive concept” in that they simply recite an abstract concept as performed by a generic computer. In arriving at this conclusion, the Court noted that the claims do not “improve the function of the computer itself or effect an improvement in any other technology or technical field”. This language calls to mind the technical effect requirement imposed by the European Patent Office (EPO) to substantiate the presence of an inventive step. Although the EPO requires an invention to provide a non-obvious technical solution to a technical problem, the USPTO demands no similar technical effect to comply with the non-obviousness requirement of 35 U.S.C §103. However, in light of the present case, it would seem that the “significantly more” or “inventive concept” deemed necessary to transform an abstract idea into patent eligible subject matter may now imply a technical effect requirement.

Three of the five judges held the view that any “claim that merely describes a method of doing business does not qualify as a ‘process’ under 35 U.S.C §101.” Although the decision does not expressly state that business methods are not patentable, it is likely that any business concepts will be found to be abstract ideas and “significantly more” in the form of a technical effect may be required to render a claim directed to a business concept patent eligible.

The outcome of this case may have some bearing on the expected decision in connection with the appeal to the Research Affiliates⁴ decision, which was heard by the Full Court of the Federal Court in November 2013 as well as the yet to be heard appeal against the RPL⁵ decision. It is hoped that these decisions will provide some clarity on the patentability of computer implemented inventions in Australia and in particular those relating to business methods.