Richard Lloyd

As you read the Supreme Court’s ruling from yesterday in Alice Corp v CLS Bank your first response might be, what took them so long? In finding that the patent claims at issue were ineligible the nine Justices (who issued a unanimous opinion) stuck tightly to their brief, reemphasised the rules they laid down in two previous cases – Bilski and Mayo – and resisted the temptation to rule aggressively against software or business method patents.

That’s not to say that Justice Thomas’s opinion is not significant for the patent community, it’s just to point out that the key in this case is in the emphasis rather than the novelty. For some members of the patent bar that meant it was a missed opportunity. You can find a range of comments from the market at the bottom of this blog but to highlight just how frustrated part of the community was by yesterday’s decision, here’s the view of Todd Dickinson, Executive Director of the American Intellectual Property Law Association, who spoke to the IAM blog soon after the decision was handed down:

“It’s pretty disappointing. My initial reaction was almost why did they bother? What they’ve essentially done is say that this is Bilski plus a computer and that doesn’t make these claims any more patentable but we knew that already. The Federal Circuit is split because it has not been getting clear guidance on what an abstract idea is and the Justices still haven’t provided that guidance. I guess the silver lining is that they’ve followed the Hippocratic oath and done no harm.”

In the oral arguments at the end of March it was clear that some of the Justices were grappling with several elements of this case. Justice Breyer referenced Scylla and Charybdis as he described the precarious course the court was trying to chart in weighing up the merits of the more than 40 briefs filed with the Court. In this opinion, that delicate balance is apparent once again as Justice Thomas reiterates the Court’s long-held view that laws of nature, natural phenomena and abstract ideas are not patentable, a triumvirate that it has referred to as, “the basic tools of scientific and technological work.” The opinion then adds: “We have repeatedly emphasised this… concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity. At the same time we tread carefully in construing this exclusionary principle lest it swallow all of patent law.”  If you buy into Dickinson’s vision (and we should point out that many patent lawyers were buoyed by the decision) then SCOTUS’s patent odyssey goes on.    

Although much of the weight of this case will depend on how it is interpreted by the lower courts, particularly the Court of Appeals for the Federal Circuit, and the USPTO, there doesn’t appear to be much to fear for those NPEs, both public and private, that boast high-quality portfolios.  The scrapping of patent legislation in the US Senate has fuelled something of a bull run for the PIPCO market and, with the Supreme Court Justices resisting the urge to issue a far-reaching ruling on software or business method patents, this decision could add further upside to PIPCO valuations. The ruling in Alice also adds further weight to the shift in the market that increasingly places greater onus on patent validity rather than infringement.   

On a final note, it’s worth highlighting that the anti-business method patent brigade is still alive and well on SCOTUS. Justice Sotomayor was joined by Justices Ginsburg and Breyer in a concurring opinion in which Sotomayor writes: “As in Bilski… I further believe that the method claims at issue are drawn to an abstract idea.” In Bilski, Justice Stevens wrote a much longer concurring opinion (in which he was joined by Breyer, Ginsburg and Sotomayor) that outlined the case against business method patents. Notably Justice Kagan, who replaced Stevens in 2010, did not join her liberal colleagues in Alice, but it’s worth bearing in mind that a third of the Court would still like a significant chunk of the patent market wiped out.   


Comments from the market

“As with many decisions, it is difficult to define the practical implications—other than it will lead to more arguments.  The Supreme Court affirmed a decision from the Federal Circuit applying existing precedent — so not the big change many were expecting.  What it all means we will not know until a few of these cases move up to the Federal Circuit, but I think I get it—adding “using a computer” to do something that is not 101 eligible does not make it 101 eligible.”

Erich Spangenberg, IPNav

“This opinion provides a level of certainty that lower courts haven’t had before. A court with final authority has now definitively said that if you have an abstract concept and merely apply it on a generic computer, that’s not enough to save you from an invalidity ruling under section 101. There’s not necessarily any new legal concept in the opinion but it’s a matter of emphasis, and this decision undoubtedly provides guidance for future claims. “

“From a tech company perspective, on the overall balance of things, I would be happy with this decision because it attacks the heart of many NPE patents, particularly those consisting of overly broad claims that some trolls try to assert.”

Ching-Lee Fukuda, Ropes & Gray

“Microsoft is pleased that the Court has confirmed existing law that abstract ideas are not eligible for patent protection, and distinguished the Alice patent from software inventions. Software powers nearly every inventive device, service and product in our world today, and providing patent protection for software-enabled technologies is critical to incentivizing innovation in every industry and sector of the economy.­

Horacio Gutierrez, Deputy General Counsel & Corporate Vice President, Microsoft

"Patent law is a complex area of the law, with numerous interweaving doctrines.  When generalists enter this arena, they sometimes fail to understand how different concepts relate to each other within the statutory framework.  Today's Alice Corp. decision is one more example of this failure.  In an effort to explain its recent decisions about when patents involving abstract ideas are patentable under Section 101, the Court relies on concepts more appropriate for a novelty analysis under 35 Sections 102 and 103.  The result of this decision, therefore, will be more confusion about patentability under 101, not less."

Graham Gerst, Global IP Law Group 

“Today’s decision affirms software's critical role in modern innovation and the need for patent protection. Software innovations are powering the latest technologies in every industry, including IBM, Ford, GE, DuPont and others, creating American jobs and driving our economy. This decision helps maintain a positive climate for technology innovation in the United States.”  

David Kappos, Senior Adviser, Partnership for American Innovation.

“In short, the decision reaffirms the Court’s guidance in Bilski and Mayo, and does not represent a change in course.  Since Bilski, it had been more difficult to gain allowance of business method patents, and easier to obtain invalidation of such claims in litigation.  This decision should not change that.  Software inventions that improve the functioning of the computer itself, the Court notes, will continue to be patentable.”

Linda Thayer, Finnegan, Henderson, Farabow, Garrett & Dunner

“The Supreme Court’s holding in Alice Corp. v. CLS Bank Int’l is significant because it chose not to decide the ultimate question whether “claims to computer-implemented inventions . . . are directed to patent-eligible subject matter?”  Despite inviting the parties to brief this ultimate issue, the Court affirmed the Federal Circuit’s and district court’s invalidation of the claims by applying its In re Bilski and Mayo Collaborative Services precedents.  By granting certiorari on the ultimate question and then refusing to address it, the Court endorsed the status quo, in which computer-implemented inventions and business methods are patentable.  Justice Sotomayor’s concurring opinion, joined by Justices Ginsburg and Breyer, indicates that at least three justices supported a broader holding that would have invalidated all method claims.” 

Orion Armon, Cooley

“The decision provides important clarity on the elements set forth previously in both Bilski and Mayo.  Clearly, some on the court below were hung up on the language in Bilski that one of the tests of patentable subject matter could be whether the business method was tied to a machine or transformation.  This permitted them to look at a method on a general computer (a machine) and find that it passed muster.  Here, in Alice, the Court is saying, “no” that isn’t what was meant in Bilski.  A general purpose computer, no matter how many individual elements of it are claimed won’t be enough for patentable subject matter because those are longstanding generalised computer elements.  Instead, an inventor will either need to develop claims that set forth how the idea specifically improves the operation of the computer or uses the abstract method and computer software to create a technological advancement in some other area.  The other new element is that the decision is unanimous.  The concurrence by Justices Sotomayor, Ginsberg and Breyer would have taken it a step further but they are in agreement on all the elements.  That wasn’t true before.  Bilski had a lot of different voices speaking.  Alice is uniform and this itself provides clarity.”

Cynthia Kernick, Reed Smith

“Today’s news will hopefully add further clarity to the question of software patentability in the US. While much software will remain patentable, it will likely become more difficult to obtain patents for some computer-implemented business schemes. The US has, for some time now, been hardening its approach to software patentability, thereby bringing its practice more in line with European practice.”

“The Supreme Court’s opinion confirms that for a software invention to be patentable in the US, the computer must do more than merely automate an abstract business method. The Court’s reference to a requirement for improvement in ‘an existing technological process’ brings the US closer to Europe on this difficult issue, than it has been for some time. It seems that both jurisdictions will now look for some technical ‘inventive concept’ if an invention is to be patentable.”

“European companies may need to reconsider their patent filing strategies as a consequence of this opinion. Strategies premised on the availability of US patents directed to relatively abstract business concepts may no longer be appropriate. Of course, a new judicial pronouncement like this in such a difficult area will cause some uncertainty until there is a body of decisions which makes clear how the law will be applied in practice.”

Mark Kenrick, Patent Attorney specialising in software and Partner at Marks & Clerk