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Supreme Court: Two-Step Test to Evaluate Patent Eligibility

June 27, 2014

Last week, the United States Supreme Court rendered a decision concerning the patent ineligibility of method claims drawn to an abstract idea, and of computer system and/or computer-readable medium claims for carrying out such method. Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014). In rendering its decision, the court cautioned that, while it has long held that laws of nature, natural phenomena, and abstract ideas are not patentable, "we tread carefully in construing this exclusionary principle lest it swallow all of patent law.” Id. Indeed, the court elaborated that “[a]t some level, ‘all inventions ... embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.’” Id.

The court indicated that one needs to apply a two-part test to distinguish (i) unpatentable laws of nature, natural phenomenon and abstract ideas from (ii) patent-eligible applications of those unpatentable concepts. First, the court must determine “whether the claims are directed to one of those patent-ineligible concepts.” Id. Second, if they are, then the court must “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.’” Id. (emphasis added)

The court said it “need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.” Id. The court concluded that “there was no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.” With regard to the second part of the test, the court explained that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” Id. The court explained that “[s]tating an abstract idea ‘while adding the words ‘apply it’ is not enough for patent eligibility.” Id.

In applying the test, the court held that the claims drawn to a method for mitigating a settlement risk failed to pass the two-part test and explained that “the claims at issue amount to ‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” Id. The court further explained that “petitioner’s method claims simply recite the concept of intermediated settlement as performed by a generic computer.” Id.

The court held that the claims that were drawn to a computer system and/or computer-readable medium for carrying out that method were likewise patent ineligible “for substantially the same reason.” Id. The court seemed concerned that a contrary result “would make the determination of patent eligibility ‘depend simply on the draftsman’s art,’ thereby eviscerating the rule that ‘laws of nature, natural phenomena, and abstract ideas are not patentable.’” Id.