Alice Corp. v. CLS Bank International [PDF] is the last of several patent law cases decided by the US Supreme Court in its October 2013 term. While the decision has generated considerable speculation questioning the future of "software patents," conclusions on the scope of patent-eligible subject matter will have to wait. The court's unanimous and fact-specific holding serves to disappoint proponents and opponents of software and business method patents alike. The court's decision, however, is not surprising to those familiar with the never-ending struggle to define the metes and bounds of patentable subject matter.
The Supreme Court has struggled with analyzing the subject matter requirement of patents for well over a century. Under 35 USC § 101, "any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof" is eligible for patent protection. Other statutory sections require the subject matter to be novel, non-obvious and described in a reasonably clear manner. The US Court of Appeals for the Federal Circuit, specially designated to decide issues of patent law, has not provided consistent guidance despite having numerous opportunities. The en banc Federal Circuit in Alice is illustrative—the appellate court issued seven disparate opinions and failed to garner a majority vote on even one. Panel decisions from the Federal Circuit have been equally discordant and irreconcilable, seemingly serving as gap-fillers between Supreme Court rulings.
A trip down the Alice rabbit hole requires a review of the court's § 101 jurisprudence and accepting from the start that no case extends far beyond its specific facts and claim language. The "test" arguably articulated by the court in Alice is the following:
First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, we then ask, "[w]hat else is there in the claims before us?" To answer that question, we consider the elements of each claim both individually and "as an ordered combination" to determine whether the additional elements "transform the nature of the claim" into a patent-eligible application. We have described step two of this analysis as a 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."
The so-called "inventive concept" prong has been the subject of many concerns over a perceived overlap in the tests for subject matter eligibility and novelty. Tracing this analysis through a history of Supreme Court decisions illustrates what this inquiry is supposed to entail.
The "inventive concept" language was first introduced by the court in Parker v. Flook. In Flook, the court examined the patentability of claims drawn to mathematically calculating alarm limits for process variables, not limited by any computer hardware, during the catalytic conversion of hydrocarbons. In examining the mathematical claims, the court stated:
Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.
In Flook, the court found that the claims at-issue were not an "inventive application" of the formula for calculating an alarm limit for a process variable, but were instead drawn to nothing more than the formula itself.
The court in Flook emphasized that the inquiry into an "inventive concept" and "inventive application" did not involve an examination of prior art by warning against "confus[ing] the issue of patentable subject matter under § 101 with that of obviousness under § 103." In other words, the court found that applying the abstract idea or law of nature to accomplish a result was distinguishable from the abstract idea or law of nature itself, even if the application of the idea lacked novelty. In addressing the confusion between prior art validity and the "inventive concept" analysis, the Flook court provided the clearest guidance in a footnote:
Whether or not respondent's formula can be characterized as "obvious," his process patent rests solely on the claim that his mathematical algorithm, when related to a computer program, will improve the existing process for updating alarm units. Very simply, our holding today is that a claim for an improved method of calculation, even when tied to a specific end use, is un-patentable subject matter under § 101.
The court could have been clearer. While giving a warning in the footnote, the court's opinion engaged in a discussion of what was "known" and "within the prior art." The court's assumption that the mathematical equation was "known" can be misleading if read without context. The assumption was made to determine if the claim, as a whole, was directed to an invention other than the formula itself, not to individually examine the claim elements in isolation to determine if they were within the prior art.
While Flook may be the first time that the court discussed an "inventive concept," the analysis finds its roots in Neilson v. Harford, an English case first cited by the court in O'Reilly v. Morse. The language from Neilson that the Morse court adopted is the following:
After full consideration, we think that the plaintiff does not merely claim a principle, but a machine, embodying a principle, and a very valuable one. We think the case must be considered as if the principle being well known, the plaintiff had first invented a mode of applying it . . .
Neilson provides the original, unadulterated test: if a principle is at issue in a patent claim, the claim is eligible subject matter if it is drawn to a mode of applying that principle. After Morse adopted this reasoning, the inquiry clearly required determining if the claim includes an invention other than the principle itself.
After Flook, the court revisited the issue in Diamond v. Diehr. In Diehr, a divided court found that a claim directed to a process for curing synthetic rubber, including a mathematical formula, was patent-eligible subject matter. Diehr therefore clarified the test that was implicit in Flook: a mode of applying an abstract idea or law of nature, even if lacking in novelty, is patentable subject matter. As in Flook, the Diehr court warned that "[t]he 'novelty' of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter."
The Patent Office took the position in Diehr that the language from Flook concerning the assumption of what was "known" mandated "dissecting a claim into old and new elements" to determine eligibility. In another footnote, the court flatly rejected this argument:
The fallacy in this argument is that we did not hold in Flook that the mathematical algorithm could not be considered at all when making the § 101 determination. To accept the analysis proffered by the petitioner would, if carried to its extreme, make all inventions un-patentable because all inventions can be reduced to underlying principles of nature which, once known, make their implementation obvious.
Diehr therefore clarified that "claims must be considered as a whole" and not dissected "into old and new elements ... to ignore the presence of the old elements in the analysis."
Almost thirty years after Diehr, the court in Bilski v. Kappos held that a particular business method patent drawn to a method of hedging risk in commodities trading was ineligible for patent protection under 35 USC § 101. The Bilski court did not undergo an analysis similar to that of Diehr or Flook, instead focusing on whether the claim was tied to a particular machine or apparatus. In rejecting the claims, the majority cited to particular prior art references in support of the proposition that "[h]edging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class." The concurrence in Bilski expressed concern that the majority opinion imported principles of prior art validity into its analysis. ("But the fact that hedging is 'long prevalent in our system of commerce,' cannot justify the court's conclusion, as 'the proper construction of § 101 . . . does not involve the familiar issu[e] of novelty' that arises under § 102.")
If matters were not complicated enough, the court's decision in Mayo Collaborative v. Prometheus Lab two years later addressed the patent-eligibility of a method of treatment premised on existing relationships between concentrations of certain metabolites in blood and the likelihood of harm or ineffectiveness of a drug. The Mayo court performed the "inventive concept" analysis by first examining the elements of each claim individually and then as an "ordered combination." While the court quoted Diehr for support of this two-step analysis, Diehr arguably supports only the "ordered combination" aspect of the test. In examining the elements individually, the Mayo court noted that "methods for determining metabolite levels were well known in the art" and that a particular step "tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists who work in the field." This analysis is difficult to reconcile with the court's prohibition on combining the subject matter requirement with that of novelty or obviousness.
Prior to Mayo, it was clear that the "inventive concept" prong did not involve an inquiry into what was "known" or "within the prior art." The assumption from Flook that the underlying concept was "known" was merely a way to frame the question of whether the "invention" was more than the abstract idea itself. An "invention" is a "discovery" or a "finding," and need not be novel or non-obvious. Just because two individuals simultaneously developed the integrated circuit, months apart, does not mean that both Jack Kilby and Robert Noyce were not inventors. The "inventive concept" analysis merely asks whether the "discovery" or "finding" made by the inventor is something other than the law of nature or abstract idea itself.
The Alice court focused on the Mayo "two-step" and underwent a similar analysis. The court found particularly instructive the proposition in Mayo that, since "metabolite levels were already 'well known in the art,'" the claim amounted to nothing more than "an instruction to doctors to apply the applicable laws." Applying this reasoning to Alice's "computerized" business method patents, the court first stepped through the claim limitations in isolation and found that the computer functions to "obtain data, adjust account balances and issue automated instructions ... are 'well-understood, routine, conventional activit[ies]' previously known to the industry." Unlike the Flook, Diehr and Bilski decisions, a discussion of the boundaries between subject matter eligibility and novelty—even in a footnote—was noticeably absent from Alice.
Regardless of whether the ultimate outcome in Alice is correct, the analysis certainly appears distinct from that of Flook and Diehr. Examining individual claim limitations in isolation as an initial step runs the risk of dictating the outcome of the "ordered combination" second step. In view of the reasoning from Mayo and Alice, it is difficult to imagine a scenario where any claimed step or limitation, in isolation, could be viewed as being more than conventional. Such an analysis could easily run afoul of the mandate from Diehr to view the claims as a whole to determine if it "adds something more" to the underlying principle. The import and applicability of Alice will ultimately depend on how the Federal Circuit and Patent Office adopt the reasoning.
Christian Ehret is an intellectual property lawyer at The Webb Law Firm in Pittsburgh, PA. His practice focuses on patent and copyright issues arising in the software and electronics industries. Christian was an editor for JURIST while attending the University of Pittsburgh School of Law. The views expressed here are his own.
Suggested citation: Christian Ehret, Alice's Inventive Concept, JURIST-Hotline, July 7, 2014, http://jurist.org/hotline/2014/07/christian-ehret-alice-corp-patent.php.
This article was prepared for publication by Jason Kellam, a Section Editor with JURIST's Commentary services. Please direct any questions or comments to him at firstname.lastname@example.org