High court invalidates some business methods, leaving some uncertainty

By: William S. Parks*

Another chapter in the continuing saga of business method patents was recently added with the Supreme Court’s Alice v. CLS Bank decision. Prior decisions had given credence to the concept that adding a computer or some other type of transformative quality to a method of ostensibly handling a business-like process was sufficient for patenting purposes (or, at least to move past the threshold question of whether the claimed method met the basic patentability criteria of 35 §101). In addition, certain court opinions had appeared to establish a definition of an “abstract idea” in the patent realm. Since long-held and followed principles have refused patent protection to methods based strictly on abstract considerations, the coupling of a computer-transformative action appeared to provide a basis for inventors to move forward in this area. With Alice, however, the Supreme Court has apparently done away with this well-understood patenting basis.

The Alice decision concerned an infringement claim on several business method patents that claimed schemes for mitigating settlement risks within financial exchange agreements. Basically, the overall method concerned the assessment of risk as to whether one party to an agreement would satisfy a set obligation. The overall method was undertaken through a computerized system that acted as the third-party mitigator, rather than utilizing an actual person for such a purpose. The Court’s opinion written by Justice Thomas, viewed this configuration initially as a simple “building block” since the underlying method was a fundamental practice long prevalent in our system of commerce (reiterating the standard set forth in Bilski v. Kappos). In effect, the Court decided that if the method at issue was in practice and was a basic concept without any unconventional process steps added, then such a “fundamental economic practice” was insufficient to overcome the “abstract idea” label, and was therefore unpatentable.

Additionally, the Court emphasized that even with computerized process steps included, the overall method remained within the confines of the “abstract idea” definition. Basically, since the computer in this instance replaced a person as mitigator for risk assessment purposes, the computer itself was nothing more than a stand-in for a standard role within the fundamental activity. Thus, unless the computer provided some manner of “unconventional” actions or further process steps that accorded more than the basic mitigation activities themselves, there was no difference between an electronic and a manual version of the overall method.

With this decision, some clarity may have been provided to the patent realm, at least in terms of the reliance upon computerized devices as the basis of transformative qualities. A deeper review, however, of the Court’s decision leaves some rather troubling concerns pertaining to “abstract ideas” in general. As noted above, and in the Bilski decision, the Court apparently relied upon the “longstanding commercial practice” of the claimed methods themselves to determine abstractness. The thought that “abstract ideas” were confined to “preexisting, fundamental truths that exist in principle apart from any human action” was summarily dismissed in favor of the understanding that such claimed activities were grounded in fundamental and well-established economic practices. As such, it appears the Court has determined that methods which are, at their base, long-followed within the specific art area in question, “abstract” in the sense that they are not novel, which is a different statutory basis for patentability. The further indication that including “unconventional” process steps and requirements would provide suitable bases to remove the “abstract” label (which mirrors, apparently, the inclusion of further claim limitations to avoid a novelty rejection) seems to support this conclusion, as well.

With that in mind, the takeaway from Alice, at least for the moment, is the need to include unconventional disclosures and claim requirements in order to not only avoid a novelty problem, but also to pass through the patentability threshold of 35 §101. Adding the standard “non-transitory computer medium” or other like language to claims is also ineffective. Thus, the narrower the claim, the better the chance of not only obtaining the desired patent, but have it hold up in court.

* The author is counsel to the regional law firm Wyatt, Tarrant & Combs, LLP, and is currently a member of the firm’s intellectual property service group and the inaugural Chairperson of the Memphis Bar Association’s Intellectual Property/Entertainment Law Section.

Leave a reply. Please note that although this blog may be helpful in informing clients and others who have an interest in information privacy and security, it is not intended to be legal advice. The information on this blog also should not be relied upon to form an attorney-client relationship.

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