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On June 19, 2014, the U.S. Supreme Court provided a groundbreaking opinion on patent subject matter eligibility in the case of Alice Corporation Pty. Ltd. v. CLS Bank International.  The complete decision can be downloaded here: http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf.    The Petitioner (Alice) was an assignee of patents that centered on mitigating settlement risk (which is a risk that only one party will satisfy its obligation), while the Respondents owned a global network for facilitating currency transactions. After the Bilski case was decided by the U.S. Supreme Court in 2010, the District Court in this case held that all of Alice’s patent claims were invalid under 35 U.S.C. Section 101 on the grounds that they were directed to an abstract idea.  The Federal Circuit affirmed, and the U.S. Supreme Court also affirmed by way of this decision.

At issue before the U.S. Supreme Court were 4 patents owned by Alice, namely U.S. Patent Nos. 5,970,479; 6,912,510; 7,149,720; and 7,725,375. The U.S. Supreme Court noted that the patent claims were all directed to “facilitate the exchange of financial obligations between two parties” using a third party intermediary computing system. The claims included claims directed towards methods for exchanging financial obligations, a computer system configured for carrying out such methods, and a computer readable medium containing program code for performing such methods.

The U.S. Supreme Court stated “We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”  In reaching this holding, the U.S. Supreme Court reviewed 35 U.S.C. Section 101 regarding Patent Subject Matter Eligibility and the exceptions to Section 101 (which are laws of nature, natural phenomena and abstract ideas).  T

Then, the U.S. Supreme Court reviewed the two step framework that it previously provided in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012) in order to distinguish patents that fall within the Section  101 exceptions from those that are patent-eligible.  In the first step under the Mayo framework, the Court must determine whether the claims at issue are directed to one of the patent-ineligible concepts. If the claims are directed to patent-ineligible concepts, then the Court must ask “what else is there in the claims before us?” The Court must consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application.   In applying the first step of the Mayo framework to the instant case, the U.S. Supreme Court determined that the Alice patent claims fell within the exception of Section 101 regarding abstract ideas.

The U.S. Supreme Court then reiterated that the second step of the Mayo framework is a search for an “inventive concept’”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”  The U.S. Supreme Court determined that the Alice claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.  Furthermore, the Court stated that a claim that recites an abstract idea must include “additional features” to ensure “that the [claim] is more than a drafting effort designed to monopolize the abstract idea.”