Patent News

Jan. 29, 2015

ABA Journal: Business-method and software patents may go through the looking glass after Alice decision, by Steven Seidenberg

This article originally appeared in ABA Journal on January 29, 2015.

Few U.S. Supreme Court rulings have been embraced so enthusiastically. As soon as the court handed down its decision in Alice Corp. v. CLS Bank last June, lower courts and the U.S. Patent and Trademark Office began displaying a new, marked hostility toward software and business-method patents. They are now striking down these patents in record numbers and denying applications that would previously have been granted. It is basically open season on these patents.

“After Alice came down, some feared that almost all software-related patents would be held invalid. It looks like that is happening. Since the decision, district courts have uniformly knocked down those patents. But what may be more interesting is that business-method patents are going down in droves,” says Rochelle C. Dreyfuss, a law professor at New York University and co-director of the Engelberg Center on Innovation Law & Policy.

“It’s a new world order in the aftermath of Alice,” says Dale S. Lazar, a partner in DLA Piper’s Reston, Virginia, office.

In Alice, the justices toughened the rules for deciding which inventions are eligible to be patented. The court unanimously declared that in order to be deemed patent-eligible subject matter, an invention must pass a two-step inquiry: First, does the invention consist in significant part of a patent-ineligible concept—for example, a law of nature, natural phenomenon or abstract idea? If so, the invention is patent-eligible only if the remaining parts of the invention have an “inventive concept”—one or more elements that ensure a patent on the invention amounts in practice “to significantly more than a patent upon the ineligible concept itself.”

The invention at issue in Alice was a computerized method to perform electronic escrow for online transactions. The court found the patent on this invention claimed the abstract idea of escrow, which was patent-ineligible. The remainder of the invention, performing the escrow on a general purpose computer, was not sufficient to provide an inventive concept.

“A mere instruction to implemen[t]” an abstract idea “on … a computer … cannot impart patent eligibility,” the court stated. Finding that the invention consisted of patent-ineligible subject matter, the court struck down the patents on the invention.