Friday, June 20, 2014

US Court says no to patent on computer-implemented business method

delete, accept, and deny cookiesThe United States Supreme Court has handed down a decision that is important for all business method patent applicants. In Alice Corporation Pty. Ltd. v CLS Bank International et al the Court held that use of a generic computer does not transform an abstract idea into a patent-eligible invention.

Alice Corporation is the owner of several patents covering a business method for mitigating settlement risk. This settlement risk is the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. The claimed invention used a computer system as a third-party intermediary.

The Mayo test

The Court affirmed what it called a 'framework' from Mayo Collaborative Services v Prometheus Laboratories, Inc. It is supposed to distinguish patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.

It involves:

  1. determining whether the claims are directed to a concept that is not patent eligible; and
  2. if so, determining whether any additional elements in the claims 'transform' the nature of the claims into a patent-eligible invention.

What is not patent-eligible?

The Court held that the claims were drawn to the abstract idea of intermediated settlement, the use of a third-party to mitigate settlement risk. The Court referred to Bilski v Kappos in which the Supreme Court rejected a method for hedging against the financial risk of price fluctuations.

Apparently the concept of intermediated settlement is a fundamental economic practice long prevalent in the United States system of commerce.

Alice Corporation tried to argue that the abstract ideas category is confined to preexisting, fundamental truths that exist in principle apart from any human action. The Court didn't accept that argument.

What else do you need to transform a claim?

The Court considered whether there was anything else in the claims to transform them into a patent-eligible application. The answer was no. The method claims merely required generic computer implementation and therefore failed to transform the abstract idea into a patent-eligible invention.

So what exactly does an applicant need to transform a claim? The judgement does not give clear guidance on this point. It is up to the Federal Circuit Courts to clarify these lofty directives.

There are some clues though. The decision says that the method claims do not purport to improve the functioning of the computer itself. Nor do they effect an improvement in any other technology or technical field. So it is likely that additional elements in a claim that do that will be helpful.

Could it be that we are going to see a technical effect requirement similar to Europe?

The draughtsman's art

Something else that was interesting about this case is that the Court did not distinguish between the method claims, the system claims and the computer-readable medium claims. It rejected them all.

The system and media claims were held to add nothing of substance to the underlying abstract idea in the method claims and were therefore held to be patent ineligible.

The Court reaffirmed several times that patent eligibility does not depend simply on the draughtsman's art. Putting this another way, the law of patentable subject matter is not 'like a nose of wax which may be turned and twisted in any direction'. I love the idea of my work being considered art.

The way forward

It is clear that computer-implemented inventions based on abstract ideas are not patentable in the United States. It is equally clear that mere generic computer implementation is not a cure. However, a technical effect in a claim is likely to get it over the line.

Photo courtesy of author stallio under Creative Commons licence.

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