Are Business Methods Patent Eligible After SCOTUS Alice v. CLS Decision?

Posted Sunday, November 30, 2014.

This past June, the Supreme Court delivered an opinion in Alice Corp. v. CLS Bank International. The decision invalidated an Alice Corp. patent by ruling that the subject matter of the patent claims was not patent-eligible. The patent claimed a method for mitigating “settlement risk” in financial obligations. Patent claims to a computer system configured to perform the method were also present in the patent in question, as were claims for a computer-readable medium with program code for carrying out the method.

These types of claims represent three different ways that patent attorneys write claims for inventions implemented in software. Other strategies for drafting such patent claims exist, but the Court specifically wrote about claims to methods, and the computers and media associated with the methods.

Patent eligibility in the United States is codified in Title 35 of the United States Code, section 101, which reads “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” One way to obtain a patent on software is to disclose in the patent claim the algorithm driving the software. As all programmers know, an algorithm is a series of steps, or in other words, a process (one of “process, machine, manufacture, or composition of matter”).

In Alice, the Supreme Court applied the logic from its previous decision in Mayo v. Prometheus, relating to medical testing, to the claims at hand. In Mayo the court utilized a new two-step test to assess eligibility of patent claims, and under the Mayo two-step test, the claims in Alice were also invalidated.

A short concurring opinion, written by Justice Sotomayor, related to business method patents. The claims in Alice could be characterized as carrying out a method of doing business, particularly, the method of mitigating settlement risk by parties to a financial transaction. There are those who argue that the Court’s recent patent jurisprudence tells us that business methods (which can be implemented in software) are not patent-eligible subject matter.

However, in the concurring opinion, Justice Sotomayor wrote “I adhere to the view that any ‘claim that merely describes a method of doing business does not qualify as a “process” under §101’” and cited the Court’s 2010 Bilski v. Kappos decision. She was joined by Justices Breyer and Ginsburg. Notably, however, the other six justices of the Court did not join this opinion. The fact that a majority of justices on the Court declined to explicitly opine that business method patents were ineligible when given the opportunity tells us that business methods are patent eligible.

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