Supreme Court Ruling in Alice Case Undercuts Software Patents

In June, the U.S. Supreme Court issued a ruling on the patentability of software in the Alice v. CLS Bank case, significantly narrowing the patent eligibility of computer-implemented inventions. At the time of the June 19 decision, IP litigators with Goodwin Procter – which filed an amicus brief in the case – examined the Alice ruling in an IP Client Alert.

Noting the significantly narrowed eligibility of computer-implemented inventions, we also pointed out that the ruling did not specifically clarify the substantial role a computer must play to be patentable. The Court did, however, make clear to practitioners that:

  • Purely generic use of a computer will not make a non-patentable idea patentable;
  • Any basic and established business insight can be an non-patentable “abstract idea”;
  • Practitioners drafting computer-enabled method claims based on an abstract idea must make an effort to identify an element or combination of elements that amount to significantly more than the abstract idea, such as improvements in the functioning of the computer; and
  • Issued patents may be vulnerable to administrative review based on the Court’s decision.

Since that high-profile ruling, software patents have been falling like dominos as lower courts have issued numerous decisions based on Alice that suggest a decided anti-patent direction for the software industry. Indeed the post-Alice legal landscape includes no fewer than 11 federal judicial rulings that strike down patents. Legal commentators thought the Alice decision would wipe out so-called “do it on a computer” patents, and they have been proven correct.

Vox Media’s Tim Lee has an article summarizing the 11 rulings, which we wanted to share (below) as a helpful highlight of patents that have lost under Section 101 of the US patent law, which governs when a patent is an “abstract idea” that can’t be patented. Tim’s list is as follows:

  • On July 6, a Delaware trial court rejected a Comcast patent that claimed the concept of a computerized telecommunications system checking with a user before deciding whether to establish a new connection. The court noted that the steps described in the patent could easily be performed by human beings making telephone calls.
  • On July 8, a New York court invalidated a patent on the concept of using a computer to help users plan meals while achieving dieting goals. The court was unimpressed with the patent holder's argument that some of the details in the patent — such as the use of "picture menus" to choose meals — was sufficient to render it a patentable idea.
  • On July 17, the Federal Circuit Appeals Court (which is in charge of all patent cases) rejected a patent on the concept of keeping colors synchronized across devices by building a profile that describes the characteristics of each device. The court held that the creation and use of these profiles were merely mental steps that could be done by a human being and were therefore not eligible for patent protection.
  • On August 26, the Federal Circuit rejected a patent that claimed the concept of running a bingo game on a computer. "Managing the game of bingo consists solely of mental steps which can be carried out by a human using pen and paper," the court ruled. Converting that process into a computer program doesn't lead to a patentable invention.
  • On August 29, a California court struck down a patent on a method of linking a mortgage line of credit to a checking account. The court said that the generic computer functions mentioned in the patent were not enough to merit protection.
  • On September 3, a Texas trial court invalidated a patent on the concept of using a computer to convert reward points from one store to another. The court held that the "invention" claimed by the patent "not fundamentally different from the kinds of commonplace financial transactions that were the subjects of the Supreme Court’s recent decisions."
  • In a second September 3 decision, a Delaware trial court rejected a patent on the concept of an intermediary selectively revealing information about two parties to each other — using a computer. The court noted that it has long been common for corporate headhunters to withhold certain information about an employer from potential employees (and vice versa) until both parties are ready to proceed.
  • On the same day, the same Delaware court invalidated a patent on the concept of using a computerized system to "upsell" customers who buy one product on other products that might interest them. The court pointed out that upselling is as old as commerce itself.
  • In a final decision the same day, the Federal Circuit appeals court struck down a patent that claimed the concept of using surety bonds to guarantee a transaction — using a computer. The court pointed out that surety bonds have been around since ancient times, and performing this well-known transaction with the help of a computer doesn't turn it into a patentable invention.
  • On September 4, a California trial court rejected a patent on the concept of using a computer network to ask people to do tasks and then wait for them to do them. The court pointed out that people have done this with telephones for decades, and that doing the same thing over the internet doesn't count as an invention.
    • On September 11, a Florida court invalidated a patent on the concept of subtracting a small amount of money from each of many payments in order to accumulate a larger sum of money — using a computer. The court noted that this kind of schemes has been widely known for centuries. For example, the plot of Superman III involved a villain using this kind of scheme to steal from co-workers' paychecks.

Prior to this ruling, start-ups might fear infringing an unknown patent for some form of software-implemented business method. Post-Alice, the chilling effect of these patents should lessen: courts are more likely to find them invalid, and the patent owners themselves should be less enthusiastic to assert them. This frees up company founders from spending energy and time worrying about their freedom to operate in a particular area.

Founders should remain diligent in this new anti-patent environment, however, and remember to take necessary precautions to protect their valuable intellectual property. Start-ups that actually advance a state-of-the-art solution that includes computer processing steps should still investigate securing patents on valuable IP that may still be patent-eligible. 

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