On June 19, 2014, the U.S. Supreme Court affirmed the decision of the U.S. Court of Appeals for the Federal Circuit in finding that the claims at issue in Alice Corporation v. CLS Bank are patent-ineligible under 35 U.S.C. §101 because they are drawn to an abstract idea. In so doing, the Supreme Court maintained that to comply with 35 U.S.C. §101, the claims should be analyzed under the framework set forth in Mayo v. Prometheus (132 S. Ct. 1289 (2012)).

Under the Mayo analysis, the claims should first be analyzed to determine whether they are patent-ineligible (i.e., the claims cover laws of nature, natural phenomena and abstract ideas). If patent-ineligible, a determination is made whether any elements of the claim transform the claim into a patent-eligible invention. The Supreme Court’s decision reinforces and does more to heighten the considerations that should be made when drafting applications and claims and particularly those related to the implementation of mathematical and/or business concepts.

The claims at issue were found in several U.S. patents owned by Alice Corporation1 and relate to a computerized scheme for mitigating settlement risk. The claimed concept is designed to facilitate the exchange of financial obligations between two parties using a computer system as a third-party intermediary, referred to in the decision as “intermediated risk.” The claims covered various implementations of this scheme, for example, as a method, system and computer media.

In determining whether the claims were patent-eligible, the Court referred to the precedential decisions in Parker v. Flook (437 U.S. 584 (1978)) and Bilski v. Kappos (561 U.S. 593 (2010)). Relying on Bilski, in particular, the Court found that there was “no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement” to which the Alice Corporation claims were directed. In both cases, the Court found the claims were directed to abstract ideas. Namely, the Alice Corporation claims were found to recite fundamental economic practices “long prevalent in our system of commerce.”

Unfortunately, the decision makes no attempt to create a working definition of an abstract idea. Note Judge Rader’s comment in his dissenting opinion in Accenture Global Services v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013) that “no one understands what makes an idea abstract.” At one point, the CLS Bank decision implies that the claims are abstract because they are directed to a concept that is “long prevalent in our system of commerce.” However, the decision makes no attempt to link the concept of “abstract” with the fact that the subject matter may have been long prevalent. Until a working definition of “abstract” is developed, the patent community will continue to struggle with the true scope of 35 USC 101.

Using the second step of the Mayo analysis, the Court determined that the method claims at issue merely require a generic computer and, thus, fail to transform the abstract idea of intermediated settlement into a patent-eligible invention. To reach this conclusion, the Court again relied on prior precedent provided in Mayo, Diamond v. Diehr (450 U.S. 175 (1981)), Gottschalk v. Benson (409 U.S. 63 (1972)) and Flook, which all demonstrated that the claims must do more than merely instruct a practitioner to implement the abstract idea on a generic computer. Rather, the ordered combination of steps in a method claim should “improve the functioning of the computer itself” or present improved computer technology. The Alice Corporation claims, and the method claims in particular, were found by the Court to fail in providing an improvement.

No extensive analysis was performed on the system and computer media claims as Alice Corporation asserted these claims rose or fell with the method claims. Thus, these claims were also found to be patent ineligible, as the Court found that they added nothing of substance to the underlying abstract idea.

In determining whether a claim is patent-eligible, the U.S. Patent and Trademark Office is frequently satisfied if the claim includes a “processor” and, thus, ostensibly meets the “machine” requirement of 35 USC 101. To satisfy the USPTO and comply with requirements of Section 101 as determined through recent case law, whenever possible, computer-implemented inventions should be defined with additional structure or hardware. For example, in CLS Bank, the Court referred positively to the Diehr decision and noted that the “invention in Diehr used a ‘thermocouple’ to record constant temperature measurements inside the rubber mold…”

The CLS Bank decision reinforces and heightens our sensitivity to those utility patent applications related heavily to mathematical and/or business concepts. To comply with 35 U.S.C. §101, patent applications should be drafted to: (1) detail how a relevant mathematical principle or fundamental concept is intertwined with a computer system or computer processor in a specific industrial implementation; (2) describe, in detail, the structure of the computer system (e.g., provide specifications of components) and how the computer system is programmed with “special” code for executing a “special” algorithm or processing functions; and (3) provide examples of how the computer system executes the algorithm.

Even those applications that are currently pending and recently issued patents should be evaluated to ensure that they comply with the subject matter eligibility requirement and can survive the Mayo analysis. For example, in the case of an issued patent a broadening reissue application may be filed within two years of the issue date of a patent, allowing the claims to be amended in a manner to address any issue of patent eligibility.

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1 U.S. Patent No. 5,970,479; U.S. Patent No. 6,912,510; U.S. Patent No. 7, 149,720; and U.S. Patent No. 7,725,375.