U.S. Supreme Court Confirms Patents Cannot Claim Abstract Ideas

On 19 June 2014, the U.S. Supreme Court (USSC) issued a significant decision (PDF) on patent-eligible subject matter in Alice Corp. Pty. Ltd. v. CLS Bank International et al. This case particularly addresses how certain abstract subject matter may be claimed in a patent. Alice Corp. is a unanimous decision relating to the relevant patent statute, 35 U.S.C. 101.

Since reading the opinion, I have been mulling over the impact of this decision and contemplating how to apply it because I often work with computer-centric and abstract subject matter in patent claims. The U.S. Patent and Trademark Office (USPTO) has already given the Examining Corps guidance (PDF) based on this opinion. The guidance is quite specific and provides further insights on how the USPTO and everyone associated with the judiciary should apply this decision.

Alice’s patents included claims directed to a method for exchanging financial obligations, a computer system configured to carry out such method, and computer-readable media containing program code for performing such method. (An exemplary method claim is shown following these remarks.) The USSC found it unnecessary to define the “precise contours of the ‘abstract ideas’ category.”

The Alice Corp. opinion follows Mayo Collaborative Services v. Prometheus Laboratories, Inc, 566 U.S. ___ (2012), an earlier Supreme Court case. In Mayo, the USSC held that the recitation of a computer in the method claims was “‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” The USSC likewise held those claims not to be drawn to statutory subject matter under 35 U.S.C. § 101.

Section 101 defines the subject matter eligible for patent protection: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” The USSC has historically held that this provision contains an important implicit exception: “Laws of nature, natural phenomena, and abstract ideas are not patentable.” (citations omitted)

The USSC indicated that the “system and [computer-readable] media claims add nothing of substance to the underlying abstract idea” found in the method claims.The USSC cautioned that there is a need to “tread carefully” when addressing the abstract idea doctrine “lest it swallow all of patent law.” I have to agree. After all, human language is imprecise and we have to live with some amount of abstractness in order to provide some justice to those seeking to ride the intellectual coat tails of technical pioneers. This balance of fairness is at the heart of patent law where we want to reward those persons who advance civilization.

In Alice, the USSC observed that “an invention is not rendered ineligible for patent simply because it involves an abstract concept.” Justice Sotomayor and two other Justices issued a concurring opinion to state a belief that any patent claim that merely describes a method of doing business is patent-ineligible.

The USSC applied a two-part test that it introduced in Mayo – the same test that led to the Federal Circuit’s fractured en banc opinion issued earlier in this dispute. Under that two-part test, the USSC found (1) that the claims were drawn to the abstract idea of “intermediated settlement,” which is a “fundamental economic practice long prevalent in our system of commerce,” and (2) that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.”

The USSC fails to directly address several of the questions surrounding the two-part Mayo test, such as how to determine whether a claim is directed to an abstract idea and how much “more” is required to make such a claim patent-eligible. While I get the concept of “don’t try to patent abstract ideas,” I was left with the feeling of eating a big batch of cotton candy – lots of tasty opinion without a lot of practical substance about how to make the determination in other cases. Nevertheless, the Alice decision provides some guidance on how to view claims in view of section 101.

The parties agree that claim 33 of U.S. Patent No. 5,970,479 is representative of the method claims. Claim 33 recites:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record foreach stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order, and

(d) at the end-of-day, the supervisory institution instructing on[e] of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

Favorite Patents Series — the Cup Holder

One of my favorite inventions that was created in my lifetime is the coffee cup insulator sleeve. It was officially titled “Cup Holder” and is the subject of US Patent No. 5,425,497. It was filed at the @USPTO on 9 November 1993.


This little item and many variations of it are daily encountered at coffee shops all over America. It is such an apparently ordinary thing that it often escapes attention. It is one of my first recollections of recognizing that something was “patented” or subject to patent protection. Now, patents are part of my daily life as I practice my profession as a patent attorney.

Here is the Abstract of this marvelous invention:

A cup holder is disclosed in the form of a sheet with distal ends. A web is formed in one of the ends, and a corresponding slot is formed in the other end such that the ends interlock. Thus the cup holder is assembled by rolling the sheet and interlocking the ends. The sheet can be an elongate band of pressed material, preferably pressed paper pulp, and is preferably formed with multiple nubbins and depressions. In one embodiment, the sheet has a top and bottom that are arcuate and concentric, and matching webs and cuts are formed in each end of the sheet, with the cuts being perpendicular to the top of the sheet.

U.S. Supreme Court Confirms Contributory Patent Infringement Requires Direct Infringement

Yesterday, 2 June 2014, the Supreme Court of the United States (@SCOTUS) issued a unanimous decision which overturned the en banc decision of the Federal Circuit in Limelight Networks, Inc. v. Akamai Technologies, Inc. Case law is clear that induced liability may arise if, but only if, there is direct infringement. However, the Federal Circuit erroneously went further and reasoned that a defendant can be liable for inducing patent infringement under 35 U.S.C. § 271(b) even if no one has committed direct infringement within the terms of § 271(a) (or other provision of the patent laws).

SCOTUS reiterated that a “patent is not infringed unless all the steps [of the claimed method] are carried out [by a single entity].” 572 U.S. ___, *4 (2014). According to the Warner-Jenkinson case, “[e]ach element contained in a patent claim is deemed material to defining the scope of the patented invention.” A patentee’s rights extend only to the claimed combination of elements.

The Federal Circuit in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (2008) stated that a method’s steps have not all been performed as claimed by the patent unless they are all attributable to the same defendant – either because the defendant actually performed those steps or because the defendant directed or controlled others who performed them. The Court, in its opinion in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972) rejected the possibility of contributory infringement of the patent in dispute because the machines had not been assembled in the U.S., and direct infringement had consequently never occurred. The Court reasons here that “Limelight cannot be liable for inducing infringement that never came to pass.” Slip Op. at 7.

Accordingly, practitioners and patent owners are on notice that careful claim drafting and claim interpretation are needed. If you have questions about writing or interpreting claims, contact my office to arrange a free initial consultation.

My First Ten Years Practicing Law

Today, 4 May 2014, is my ten-year anniversary of being admitted to a bar as an attorney. My first bar admission was to the State Bar of Texas (see image below). Since then, I have been admitted to three other states and the U.S. Patent Bar. I have worked for over a year writing opinions for a judge: the bright, kind and currently retired Judge Richard T. St. Clair. I have been a presenter (instructor) at legal conferences in three states. I have lived in four states and visited many others. I have worked in Russia and filed patent applications in many foreign countries. I have operated my own law practice, worked for small medium and large companies. And, I have been exposed to policies, legislation, politics and the business of law. I have seen a formerly stagnant area of law (patents) dramatically get reworked by judicial opinions including the U.S. Supreme Court and by several new laws including the far-sweeping American Invents Act (AIA implemented by the USPTO) that was phased in during 2012-13. The AIA continues to foster some uncertainty in my area of expertise.

I realize that many areas of law also continue to evolve as fast as society and patent law. In a weird way, such changes are a comfort because a rapidly evolving area of law is a type of job security. Businesses and individuals are wise to consult with attorneys who keep up with current developments in the law. Making contributions to my little blawg is a way for me to force myself to read and stay current in my profession.

I am grateful to have experienced so many places and helped so many people. Over time, I have become more confident and proficient in my legal abilities and in working with people. I look forward to the next ten years. Patents and trademarks continue to keep my interest and I hope to continue to be of service to my clients and to my community. 20140421_State_Bar_Tx_Ltr_Good_Standing_sm