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Alice Corporation PTY. LTD. v. CLS Bank International Et AL.

Computer Enabled Method Patent:

Alice Corporation v. CLS Bank International (US Supreme Court, June 19, 2014)

At issue in this case were patent eligibility of claims drawn to a computer enabled business method. The Supreme Court held that the claims in this patent were not patent eligible. This decision does not spell the end to all business methods or computer based inventions. In fact, the decision in Alice Corp. does not change anything or introduce any new standards to the issue of what constitutes a patentable subject matter.

The Alice Corp. patent described a computer software and method for accomplishing the intermediate settlement in transactions. The concept behind intermediate settlement is not important for this discussion. What is important, is that was held to be patent ineligible because it essentially described an abstract idea. The Alice Corp. defined the abstract idea as something that is inherently true or well known due to a common practice in the art.

Practically speaking, the judges held that one cannot get a patent on a well-known idea or a concept known in the art by wrapping it into a software program that simply enables this idea or a concept. The problem for Alice Corp. is that the intermediate settlement process was already well established in the banking world. At the same time, the computer claims revolved around the method claims because it was fundamentally a generic computer implementation.

The court applied a two-step test that it identified in Mayo Collaborative v. Prometheus, which is A) is the idea behind the method or task organization patent eligible (is it known in the art or essentially true to that art), and if yes, B) does the computer part add something novel to the ideal. This test was set up in Mayo and in In Re Bilski, which cited Mayo. Therefore, the decision does not add anything new to the equation.

While the basics of this decision do not undermine either the business method claims or the computer claims, there are elements that a practitioner needs to watch out for. First, it is not enough to run a prior art search, one must ask the inventor or attempt to determine objectively or through research whether the invention is a fundamental idea known in the art to which the invention pertains. Second, the concurrent opinion cast doubt on the entire business method concept. While the opinion in concurrence is not precedential, it certainly indicates that business method patents are not entirely on solid grounds as far as acceptance. At least not with this existing court.

However, not all abstract ideas are essentially ineligible. The Court distinguished its decision in Diehr, 450 U. S. 175, from its decision in Alice. The Diehr patent disclosed a software that applied a well known mathematical formula to the process or curing rubber. The key in Diehr was that the formula had never been applied to the art of curing rubber, and once applied, it immediately addressed issues that had plagued that field of art. On the other hand, in Alice, the inventive concept was already well known and fundamental to the art to which Alice pertained. Therefore, it was nothing more than an abstract idea with respect to this art. If suppose the same idea was applied in an art where it was previously unknown or unapplied, it would get elevated to a legitimate subject matter.