Alice is Not in Wonderland: Generic Computers and Abstract Ideas Don’t Mix
District courts have been abuzz with accused infringers asserting invalidity based on ineligible subject matter under section 101. This is a result of evolving jurisprudence developed by the Federal Circuit and Supreme Court over the last few years. Today, that continued with the Supreme Court unanimously holding in Alice Corp. Pty v. CLS Bank Int’l, 573 U.S. ___ (2014) that, for claims drawn to an abstract idea, “merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”
This case originates from CLS Bank’s complaint seeking a declaratory judgment that Alice’s patent claims were invalid. Alice counterclaimed for patent infringement. The patent claims at issue are directed to using a third party (or “supervisory institution”) to mitigate financial risk of two parties (or “stakeholders”) to a transaction by creating account ledgers (or “shadow” credit and debit records) to ensure the parties have sufficient resources for the proposed transaction. The court held that the claims were an abstract idea and thus invalid under 35 U.S.C. §101. The Federal Circuit initially reversed, but an en banc court affirmed the District Court.
In affirming, the Supreme Court recognized the need to “distinguish between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more . . . .” To evaluate the claims at issue, the Court applied the two-step process set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. __ (2102); (i) whether the claims are directed to patent-ineligible matter (e.g., abstract idea) and (ii) whether the claims contain an inventive concept (e.g., “additional features to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea.”). The Court answered the first question in the affirmative holding that the claims “drawn to the concept of intermediated settlement” (a “fundamental economic practice” and “building block of the modern economy”) are “squarely within the realm of ‘abstract ideas.’” In addressing the second question, the Court held that the claims lack inventive concept as “each step does no more than require a generic computer to perform generic computer functions” or in other words, conventional and routine “activities previously known to the industry.” In short, a generic computer or “particular technological environment” is not enough to overcome the “inventive concept” requirement. Rather, inventive concept lies, for instance, in improving “the functioning of the computer itself” or “any other technology or technical field.” The Court cited a prior case showing that a “well-known” mathematical equation used on a computer was patentable because it “improved an existing technological process.” Thus, the “mere instruction to implement an abstract idea on a computer,” without any improvement or transformation, is not enough for patent eligibility. And, the use of physical components, such as “data processing system” and “data storage unit,” in the claim are not substantive limitations capable of conferring patentability because they are purely functional and generic.
In a concurring opinion, three justices ascribed to the view that “a method of doing business does not qualify as a process” under section 101.
Gibbons will continue to track how courts apply the new guidance provided in this case concerning patent eligible subject matter.