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Although the general ruleAudrey-Millemann-03_web (based on 35 USC section 101) is that anything made by humans is patentable, there are exceptions. Laws of nature, physical phenomena, and abstract ideas are not patentable. Inventions that fall in these categories are “patent-ineligible,” that is, directed to subject matter that is not eligible to be patented. After the Supreme Court’s key decisions over the last few years in Bilski v. Kappos, 130 S. Ct. 3218 (2010); Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), and Alice Corp. Pty. Ltd. V. CLS Bank International, 134 S. Ct. 2347 (2014), the courts have increasingly held computerized methods of doing business unpatentable.

The district court for the Eastern District of Texas, where many patent infringement cases are filed, handled such a case in Kroy IP Holdings, LLC v. Safeway, Inc., 2015 U.S. Dist. LEXIS 69363. In Kroy, the court provides a useful review of the state of the law, starting with the three Supreme Court cases.

In Bilski, supra, decided in 2010, the Supreme Court held that claims to a method for commodities traders to minimize the risk of price fluctuations was an unpatentable abstract idea. The idea of hedging against risks is a common practice in our economy. The Court found that an idea cannot be made patentable by limiting it to a particular field, such as commodities. The Court held that the Federal Circuit Court of Appeals’ previous test for claims that appear directed to abstract ideas, the machine-or-transformation test (which requires a claimed method to be linked to a particular machine or to transform an article into something else in order to be patentable) is one test that can be used, but is not the sole test.…

Continue Reading Why Business Methods Are Difficult to Patent

The long-awaited decision by the United States Supreme Court on business method patents was issued on June 19, 2014.  Unfortunately, the decision raised more questions than it answered.  The expectation was that the Supreme Court would clearly explain the difference between unpatentable abstract ideas and patentable software, including business methods.  Instead, the Court issued a very narrow decision with broad, but uncertain ramifications.  The Court applied a test it has previously relied upon, striking down all of the patents in the case and expressly stating that it was not opining on the patentability of software or business methods in general.

The case is Alice Corporation Pty. Ltd. v. CLS Bank International, 2014 U.S. Lexis 4303 (U.S. Supreme Court, June 19, 2014). Alice Corporation’s patents were directed to a computer-implemented process of minimizing “settlement risk” – the risk to a party in a financial transaction that the other party would not perform the transaction, by creating an intermediary using “shadow” financial records of both parties.  The claims covered the computer system to perform the process, the computerized method itself, and a computer-readable medium with the instructions to perform the method.

Alice Corporation had sued CLS Bank for patent infringement.  The district court had granted summary judgment for CLS Bank on the grounds that all of the claims were not eligible for patent protection as they were directed to an abstract idea.  A panel of the Federal Circuit Court of Appeals had reversed the district court, but then, in an en banc hearing, affirmed the district court in a set of multiple opinions.  A plurality of the Federal Circuit found all of Alice Corporation’s claims patent-ineligible, relying on the Supreme Court’s 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (2012).…

Continue Reading Business Method Patents: Murkier Water