Home > Insights > Alice v. CLS Bank – are business methods still patent eligible in the US?
1 July, 2014

It was hoped by many that the decision of the US Supreme court in Alice v. CLS Bank (released last week) would bring some clarity to the question: what software inventions can be patented under US law? The decision shied away from grand pronouncements however. Instead the Supreme Court preferred to frame their judgment with close reference to previous case law (particularly Mayo v. Prometheus (2012) and Bilski v. Kappos (2010)). Notably, Alice makes use of the framework first put forward by the Supreme Court in Mayo for determining whether a computer implemented business method is patent ineligible. The results appear to have greater impact on the patent eligibility in the US of business methods than software-based inventions per se.

Patent ineligibility under US law is centred on 35 U.S.C §101 (“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…”) together with certain judicial exceptions. Two criteria for determining the patent eligibility of a claim under these judicial exceptions had previously been articulated in Mayo v. Prometheus which states: (1) does the claim recite an ineligible concept (natural phenomena, natural law or abstract idea)?; and (2) if so, does the claim recite sufficient additional elements to make the claim to an application of the concept, rather than to the concept itself?

A question arising from the first criterion of the Mayo framework is: what constitutes an “abstract idea”? After Alice v. CLS Bank, it appears that an abstract idea can fall into two categories: first, mathematical formulae or algorithms; and second, “methods of organising human activity”, at least if they constitute fundamental economic practice “long prevalent in commerce”. Both these categories are considered patent ineligible.

The second criterion of the Mayo framework was also discussed in the decision of Alice v. CLS Bank. The judgment did not commit to any definitive test for patent-ineligible subject-matter, but endorses a view put forward in Mayo: that that a claim must do more than set forth a fundamental principle and add a generic instruction to “apply it”. The court made an example of the previous decision in Diamond v. Diehr (1981) deeming that the invention here passed the second step of the Mayo framework because it related to an improvement of “an existing technological process”. In using the language “technological processes” this appears to hint towards a more European style of analysis of patent eligible subject-matter in the US. Some commentators have questioned whether this language is an indication by the Court that “conventional” business methods cannot be considered “technological processes” – and so would be ineligible to be patented.

Significantly, the Alice decision was unanimous in its view that “merely requiring generic computer implementation” did not “transform that abstract idea into a patent-eligible invention”. In other words, taking a method which is an “abstract idea” cannot be made patent eligible simply by implementation via a computer.

The Court further stated that claims to an apparatus and computer readable media could not be used to render the invention in Alice patentable, and that the Applicant cannot simply change the category of a claim to avoid the exclusion. As a consequence, applicants may need to place greater emphasis on specific hardware features if they wish to rely on apparatus claims relating to a patent ineligible method. This may not be possible where conventional apparatus is used to implement a novel business method.

In view of the decision, the USPTO issued guidance to Examiner’s in relation to assessment of ineligible subject-matter. The guidance explicitly states that Alice does not create an excluded category of subject-matter (such as software or business methods), nor imposes any special requirements for eligibility of software or business methods. Notably, the guidance made clear that the Mayo framework should be applied to claims directed to abstract ideas, as well as to laws of nature and natural phenomena. Furthermore, the same Mayo framework should be used for assessment of all categories and types of claim (methods, product, and process claims).

In relation to the first Mayo criterion (“is the claim directed to an ineligible concept such as an abstract idea?”), the USPTO give the following specific examples of subject-matter considered ineligible abstract ideas:

• Fundamental economic practices;
• Certain methods of organising human activity;
• “an idea of itself”;
• Mathematical relationships/formulae.

In relation to the second Mayo criterion (“is any element within the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?”) the following elements were considered to indicate eligibility:

• Improvements to another technology or technical field;
• Improvements to the functioning of the computer itself;
• Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

It is not expected that Alice v. CLS Bank will bring about a step change in the practice of the USPTO or the US courts in examining ineligible subject-matter. The judgement makes it clear that technologically innovative software will not be excluded from patentability. However, the judgement appears to be a further indication of a stricter approach in the US to granting patents directed towards business methods. As in Europe, computer-implemented inventions giving a particular technological advantage are more likely to yield a successful prosecution in the US going forward. In any case, it appears certain patents to business methods may be harder to obtain and enforce in the US in future.

For further information, please contact Howard Sands or your usual Boult Wade Tennant adviser.