The Supreme Court has ruled on the patent eligibility of certain software and computer-implemented schemes. In Alice Corp. Pty Ltd. v. CLS Bank International et al., the Court found that Alice Corporation's patents cover abstract ideas that are not patent-eligible subject matter. The Court did, however, indicate that some computer-implemented methods and systems should still be patentable. While subsequent decisions will elucidate the full impact of today’s decision, it is likely that the courts and the USPTO will now take a very hard look at inventions involving economic practices, financial products, and business methods.

Alice Corporation had obtained several patents for mitigating settlement risk—the risk that only one party to a financial exchange will satisfy its obligation. In particular, claims in the patents recited computer-implemented methods, computer systems, and computer-readable media for exchanging obligations. CLS Bank challenged the patents and the trial court held that all of the claims were directed to an abstract idea and thus not eligible for patent protection under Section 101 of the Patent Statute (35 U.S.C. §101). On appeal, the Court of Appeals for the Federal Circuit affirmed, agreeing that the patent claims were directed to an unpatentable abstract idea and that merely reciting the use of a computer did not make the invention patent eligible.

The Supreme Court agreed with the Federal Circuit and concluded that the claims were drawn to the abstract idea of intermediated settlement. According to the Court, Mayo Collaborative Services v. Prometheus Laboratories, Inc. sets forth the framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. First, one must determine whether the patent claims at issue are directed to one of the enumerated patent-ineligible concepts. If so, the next question is “[w]hat else is there in the claims before us?” It must be determined whether the additional claim elements, if present, transform the claim into a patent-eligible invention. The Supreme Court described this as a search for an “‘inventive concept’—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.” Applying this framework, the Supreme Court found the claims at issue in Alice Corp to do nothing more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.

The Court did state however that “[t]here is no dispute . . . that many computer-implemented claims are formally addressed to patent-eligible subject matter.” The Court gave some guidance as to when computer-implemented inventions qualify as patent-eligible subject matter, pointing to technological improvements, such as the improved functioning of a computer. However, the Court did not otherwise make clear what other improvements would qualify as patent-eligible. What is clear is that inventors and owners of patents and patent applications should be aware of the need to recite something more than just a computer-implemented law of nature, natural phenomenon, or abstract idea.