New Supreme Court Case: Alice v. CLS Makes It More Difficult to Patent Software

The Supreme Court in Bilski v. Kappos made it difficult to patent business methods.  After Bilski, a method had to be tied to a machine or transformation to be patentable.  One way inventors got around Bilski was to tie a business method to a software application.  Now in Alice v. CLS Bank International, the Supreme Court revisited some of the issues in Bilski and ruled that simply tying a method or an abstract idea to computer software is not enough to obtain a patent.

In Alice v. CLS Bank International, the Supreme Court evaluated the validity of a software patent involving a scheme for mitigating settlement risk by using a third-party intermediary between the parties to the settlement.  The Supreme Court held that the concept of an intermediated settlement was an economic practice that was well known and had been practiced for years.  The patent used existing and known computer functions to apply the principle, and this was not enough to transform a patent ineligible idea into patentable subject matter.

USPTO Response to Alice

As a result of Alice, the USPTO issued a memorandum to examiners with new instructions about how to analyze claims with abstract ideas.  The patent office now uses a two part test to determine if the patent is directed toward patent ineligible subject matter.  For the first part of the test, the USPTO determines if the claims are directed toward an abstract idea.  Examples of abstract ideas are fundamental economic practices, methods of organizing human activities, and mathematic relationships/formulas.

If the examiner determines that the claims are directed toward an abstract idea, the examiner moves on to the second step of the analysis—which is determining if the claims amount to “significantly more” than the abstract idea.  This means that the patent claims must have meaningful limitations beyond linking the use of the idea to a particular technology.  Having a computer perform basic computer functions to carry out the idea does not necessarily add “significantly more” to the idea.  USPTO examples of limitations that add “significantly more” to an idea are “improvements to another technology or technological field” or “improvements to the computer function itself.”  http://www.uspto.gov/patents/announce/alice_pec_25jun2014.pdf  What exactly this means could and will probably be debated for years.  The USPTO examples are less than clear.

What Alice Means for Software Patents

As a result of this ruling, software patents have come under greater scrutiny from the USPTO.  For example, an inventor may have a difficult time patenting an application for a program that displays and calculates sports data or statistics.  Sports statistics have been utilized for years—even before the use of computers became commonplace.  Calculating statistics can be performed using basic Excel functions.  However, merely using a computer or Excel to calculate them does not add significantly more to the idea; it just makes it easier.  On the other hand, if the application uses statistics to run complex simulations based on the statistics that could not be performed without the aid of a computer, and the simulations are used to generate personalized coaching, then an inventor could argue that the application adds significantly more than just a method for calculating statistics.

At the end of the day, Alice does not end patenting of computerized methods/processes.  However, it will require patent attorneys to be more creative in drafting patent claims and evaluating the novelty of underlying inventions—with or without software implementation.

Article written by Jennifer Blanton and John Buche.  John Buche is a patent attorney based in San Diego. www.pacificpatentlawyers.com

Copyright 2014. Buche & Associates, P.C.