Supreme Court hears oral argument in Alice Corp v. CLS Bank: When are inventions too abstract to be patented?

April 1, 2014 By William Morriss

Yesterday, the Supreme Court heard oral arguments in Alice Corporation Pty. Ltd. v. CLS Bank International, a closely watched patent case dealing with when inventions, particularly computer or business method inventions, can be treated as unpatentable abstract ideas. This case stemmed from a declaratory judgment suit filed by CLS Bank, which alleged that Alice’s patents, which covered a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party to eliminate the risk that only one party’s obligation would be paid, were invalid.  Early on in that suit, CLS Bank moved for summary judgment, arguing that Alice’s patents were directed to an abstract idea, and so could be deemed unpatentable without requiring CLS Bank to identify any prior work by others which were the same as Alice’s invention or which were close enough to Alice’s invention to render it obvious.  This district court granted CLS Bank’s motion, and that decision was affirmed in an en banc decision by the Federal Circuit.  However, while the Federal Circuit affirmed the district court, no rationale for doing so was endorsed by a majority of the judges.  Since that time, the Federal Circuit has issued two panel decisions dealing with the question of when a computer implemented invention is too abstract to be patentable, but those decisions reached opposite conclusions and provided very little guidance for how people could expect similar cases to be decided in the future.  Thus, the Supreme Court’s treatment of this case is being closely watched, and has the potential to bring much needed clarity to what has become a contentious legal issue.

The questions during yesterday’s arguments focused primarily on where to draw the line between inventions which were or were not too abstract to be patentable.  The approach favored by the attorney for Alice Corporation – to use the abstract idea test as only a coarse filter, and rely on the other requirements of the patent act (e.g., the prohibition on patents for obvious inventions) to filter out unworthy inventions – received a notably hostile reception, with Justice Ginsburg indicating that there were at least four justices who didn’t buy it.  On the other hand, the justices also appeared hesitant to adopt the more restrictive approach favored by the government and CLS Bank – prohibiting patents for computer implemented inventions which didn’t improve the operation of the computer or improve some other technological functions – specifically asking for examples of software and business method inventions which would be patentable under that approach.  However, the fact that the questions were dominated by line drawing may be misleading. In the last case where the Supreme Court addressed what inventions are too abstract to be patentable, a five justice majority endorsed a position which was relatively close to what was being advocated by Alice Corporation.  Those five justices said relatively little during yesterday’s argument, but, when Justice Ginsburg, who was not part of that majority, said that at least four justices didn’t buy Alice’s position, Justice Scalia, interjected that “four is not five.”  As a result, it is entirely possible that a majority of justices are predisposed to only treating inventions as too abstract in truly egregious cases, and that all the line drawing questions asked during oral argument will have little impact on the ultimate outcome.

While it is unclear how much the Court’s ultimate decision will reflect the questions from yesterday’s oral argument, some of the questions did illustrate issues which the Justices felt could justify treating an invention as too abstract, and which, if avoided, could help reduce the risk of an invention being treated as abstract however the Court rules.  First, the Justices, particularly Justice Breyer, seemed to see the abstract idea exception as a useful tool for preventing people from patenting methods which were previously performed by hand (or with an abacus), simply by saying that those methods should be performed using a computer.  Thus, for computer implemented inventions, focusing on aspects of those inventions would not have been possible in a manual method could be a way of addressing concerns such as those expressed by Justice Breyer.  Second, Justices Sotomayor and Kagan appeared to be concerned that treating the abstract idea exception as only a coarse filter would allow people to get patents by describing a new function, without describing how that function would be achieved.  Thus, when drafting claims in a patent application, it may make sense to include some claims which provide a detailed description of steps or components which are specific enough so that you could refer to them in answering the question of how the invention to be protected achieves its intended benefit.  Finally, Chief Justice Roberts, in questioning the attorney for CLS Bank about why Alice Corporation’s claims should be treated as too abstract, referred to the description of Alice Corporation’s invention and said “just looking at it, it looks pretty complicated.  There are lots of arrows and they – you know, different things that go … you know, it – in different directions.”  Thus, it may make sense to draft at least some claims in a manner which emphasizes the complexity of the invention they protect, perhaps even tying them to specific figures or flow charts which could be referred to when illustrating the complexity (and therefore lack of abstractness) of the invention.  Ultimately though, given the lack of clear rules for establishing what inventions are or are not too abstract to be patented, the most prudent course is likely to use a combination of these approaches when protecting an invention, so as to minimize the risk of its being seen as too abstract under whatever framework ultimately emerges.

A transcript of yesterday’s argument can be found here.  For further information, please contact William Morriss, Matt Schantz, Ann Schoen, Steven Goldstein, or any other member of Frost Brown Todd's Intellectual Property Practice Group.