What Was the Alice Decision? And How Did It Affect Inventors Seeking Patent Protection for Software?
Alice Corp. Pty. Ltd. v. CLS Bank Int’l is a 2014 United States Supreme Court decision that significantly limited the patentability of software. For inventors, it is important to know which types of software are patent eligible post-Alice because the costs to patent inventions are commensurate with the complexity of the invention. Software patents tend to classify as mid to high-complexity cases, and thus are more expensive to prosecute with the U.S. Patent and Trademark Office. This article takes a brief look at the law that Alice affected, discusses the decision and its effects on the law, then it provides examples of software that may be patented after Alice.
The Alice decision affected patentable subject matter under 35 U.S.C. § 101. Section 101 provides four categories that limit the subject matter that is eligible for patenting. For an invention to be patent eligible, it must be a process, machine, manufacture, or a composition of matter; or any improvement of an existing invention that falls within one of the four categories. Any invention that does not fall within one of these four categories is ineligible for a patent.
Over the years, the courts interpreted these four categories to exclude laws of nature, natural phenomena, and abstract ideas, which the Court limits to “those fundamental truths that exist apart from any human action.” This last judicial exception, abstract ideas, is where the invention in the Alice case had issues with patentability.
The Alice Case
The claims for the invention in Alice were directed to computer implemented methods, systems, and media for mitigating settlement risks for financial transactions. The methods involved in the patent for mitigating settlement risks for financial transactions were already known to those in the industry. And because the methods were already known to the industry as a fundamental way of mitigating settlement risks for financial transactions, the Court found the methods to be abstract ideas. The only real difference was that the methods were applied using a computer. Thus, the relevant question for the Court to determine the patent’s validity was whether the claims of the invention did more than simply instruct the practitioner on how to implement the methods on a computer, as opposed to actually inventing something with the aid of a computer.
To answer this question, the Court developed and applied a two part test that determines whether a software was patent-eligible under U.S. patent law. In the first part of the test, the Court instructs to determine whether the claims at issue are directed to one of the patent ineligible categories. If the claims at issue are directed to one of the patent-ineligible categories, the second part of the test instructs to determine whether the claims contain an inventive concept sufficient to transform the claimed abstract idea into a patent eligible application. If it does, the software may be patent-eligible.
The unanimous Court ultimately ruled that the software patent at issue in Alice should be invalid because the methods claimed were directed to abstract ideas and because the claims merely instructed a practitioner on how to implement an abstract idea on a computer, which the Court ruled does not make the claim patentable subject matter. Regardless of the effects on the parties involved in Alice, the unanimous decision by the Court and the two part test it introduced to determine whether a software was patent-eligible under U.S. patent law had a tremendous impact on businesses. Within a short period of time, countless lawsuits were initiated challenging the validity of then-existing software patents, resulting in many patents being invalidated.
A Game of Chess – Software Patent Protection Before and After Alice
The underlying facts of Alice and its impact on software patents can best be understood with an analogy using the classic board game Chess in place of the methods for mitigating risks for financial transactions that was at issue in Alice. Chess is considered an abstract idea because there is only one known fundamental way to play the game and any variations of the rules of chess are just that, variations.
Before the Alice decision, if a person was to apply for a patent for a software version of chess, the patent would likely not have any issues with respect to subject matter eligibility. Assuming the application meets the other statutory requirements (i.e., novelty, non-obviousness, definiteness, etc.), the patent application would likely be approved and may even survive challenges of validity. After Alice however, such a software would not only fail to survive a validity challenge; it would not even be considered patent eligible subject matter.
Where, then, does the Alice decision leave legal protection for software in the United States?
For software like the chess example, where the invention claims a known abstract idea and implements it with the use of a computer, the Court now considers them forms of expression, and accordingly, are protected under copyright law.
For all other types of software, the two-part test helps determine patent eligibility, with the key factor being whether the claims contain an inventive concept sufficient to transform the claimed abstract idea into a patent eligible application.
The way the Court defined which types of software are patent-eligible by excluding certain types of software initially caused confusion among patent attorneys. In time though, the USPTO and the Court would recognize the validity of different types of software, giving patent attorneys and their inventor clients a better understanding of which kinds of software are patent eligible. The common factor among the following examples seems to be that each invention may only be practiced with the use or aid of a computer, and that the invention did not necessarily exist as a known fundamental way to practice the invention prior to the creation of the software on a computer.
Amazon’s One-Click Software
Amazon’s One-Click Software is the quintessential example of patentable software post Alice. The software allows a user to skip the online shopping cart and directly purchase a product with a single click of a button if the user has their payment, billing, and shipping information saved in their account.
This example is perfect not just for illustrating the types of software that are patent-eligible post-Alice, but it can also serve as a reminder for what kind of software is not patent-eligible. The One-Click software is patent-eligible because the software itself is the invention: the software allows a user to skip the online shopping cart and instead directly purchase a product with one click. However, if Amazon’s patent application was not for the one-click feature and instead was for the online shopping cart, then Amazon would not likely have acquired a patent because the software would be more akin to the chess example discussed above.
Over time, the USPTO and the courts recognized more software as patent-eligible, giving patent attorneys and their inventor clients some clarity for software patent applications. These patents include, but are not limited to, virus detection software, website interfaces, data compression software, machine control interfaces, encryption, and databases. As previously mentioned, the connective thread among these successful software patents seems to be the fact that each software is the invention itself; they are not merely computer implementations of already known concepts.
As made evident in this article, acquiring protection for software became a highly complex issue post Alice. Even if Alice and the subsequent software patents that were approved provide some guidance, consulting with a knowledgeable patent attorney is advised as patent eligibility is still very much dependent on the facts of each individual case.
Schedule a free consult with our expert patent attorney, Walker, to discuss the particulars of your situation.