Supreme Court Undermines Business Method Patents?

By Condo Roccia Koptiw LLP // June 19th, 2014

The Supreme Court issued a blow against software and method patents on Thursday, affirming that a financial services method and systems claims were unpatentable subject matter under 35 U.S.C. § 101 in Alice Corporation Pty. Ltd. v. CLS Bank Int’l, No. 13-298 (June 19, 2014).  The case had attracted major attention.  While IBM and other software inventors warned the Court of the risk to research and development of a broad ruling that could invalidate thousands of existing patents, Google and Microsoft urged the court to stem the tide of a growing wave of software patent litigation.

Writing for a unanimous court, Justice Thomas noted that the Court had long held that “abstract ideas,” are usually considered ineligible for patent protection, while conceding that exceptions had been made for ideas that went beyond simply, “the building blocks of human ingenuity,” and integrated those building blocks into, “something more.”  In applying the subject matter eligibility test from Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), the Court found that CLS Bank’s patent, however, did not fall within one of those exceptions, as it merely described the steps for engaging in third party intermediate settlement, and then directed the user to “apply them to a computer.”  Noting that the concept of intermediate settlement is neither new nor innovative, and that the patent simply applied conventional steps, “at a high level of generality, to a method already known well known in the art,” the Court ruled that the method was ineligible subject matter.

The Court further held that because the method did not improve the functioning of the computer itself or create any other improvement in any other technology or technical field, a computer system claim reciting a computer having structure for performing the method was also ineligible subject matter.  The Court contrasted the system claims at issue with those in Diamond v. Diehr, 450 U.S. 175 (1981), which the Court upheld as having patentable subject matter because the computer-implemented process for curing rubber used an equation in a process designed to solve a technological problem and used a “thermocouple” to obtain measurements that could not previously been obtained and fed those measurements into a computer, which repeatedly calculated the remaining rubber curing time.  Thus, according to the Court, the mere recitation of a generic computer implementing an abstract idea cannot transform a patent-ineligible abstract idea into a patent-eligible invention.


* Special thanks to CRK summer clerk, Michael C. Bonella, for his work developing this post


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