Lessons from Alice in Patent-Land

Yesterday, the Supreme Court issued its decision in Alice Corporation Pty. Ltd. V. CLS Bank International et. al.. What are the takeaways of this decision?

Here, in a summary form, are five lessons we can learn from Alice:

1. Financial methods, even if computerized, are not patentable when well-known methods are merely implemented on a generic computer.
2. On a broader scale, abstract ideas are not patentable, even if applied using a computer.
3. If method claims are not eligible for patent protection under §101 (patentable subject matter) of the Patent Code, recasting these claims as “system” claims by adding generic computer elements will not afford these claims patent protection.
4. This decision does not mean that an invention based on an abstract idea, naturally occurring phenomenon, or a law of nature is always unpatentable. The Court recognized in its opinion that all inventions, on some level, are based on abstract ideas and/or laws of nature. If the inventor does not try to broadly claim such abstract ideas or naturally occurring phenomena, but merely claims their narrow application to a solution for a specific technological problem, such invention may very well be patented, provided the solution is novel and represents a technological improvement. 
5. The patentability test has two prongs: (a) We first need to determine if the underlying invention is drawn to patent-ineligible subject matter (such as an abstract idea or naturally occurring phenomena), and (b) if so, we need to analyze a claim to see if its elements – by themselves or in combination – possess an “inventive concept” imparting to the claim patentability.

In legal profession there is an expression, “Bad cases create bad law.” There is plenty of blame to go around: Greedy corporations that tried to monopolize what belongs in the public domain; crafty patent professionals who tried to push the envelope by trying to patent unpatentable subject matter through clever claim drafting; but most of all, the Patent Office that issued scores of patents that should have never been allowed. All this created a backlash against patents. 

In its EBay decision, the Supreme Court went out of its way to say that it did not mean that individual inventors are not entitled to a permanent injunction. Notwithstanding this explicit disclaimer, this is exactly how that decision has been interpreted by the courts. Our greatest fear should be that the Alice decision will be interpreted by District Courts and by the Federal Circuit as a blanket prohibition on business method patents (particularly in view of the Concurrence Opinion filed by Justices Sotomayor, Breyer and Ginsburg). That would not be a happy ending to the story of Alice in Patent-Land.