Alice, the Illusory Death of Software Patents
|Written by: Robert Sachs
Partner, Fenwick & West LLP
Author & Founder of Bilski Blog
Posted: June 27, 2014 @ 11:23 am
~ ‘The report of my death was an exaggeration’ –Mark Twain
With apologies to the great humorist, the report of the death of software patents is an exaggeration. Some commentators quite quickly suggested that the Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___, No. 13-298 (June 19, 2014), will “invalidate the majority of all software patents in force today” and is “bad news for software patents”. That interpretation may make good copy, but it is simplistic and overblown. While the Court invalidated Alice’s patents, the decision certainly does not invalidate the majority, or even a large percentage, of software patents, nor does it radically restrict the kinds of inventions that can be patented going forward. The decision is a modest and incremental clarification in the patent law, and a not wholesale revision.
The Court set forth a two-step test grounded in Bilski v. Kappos and Mayo v. Prometheus. While the Court may not have defined a clear boundary for so called “abstract ideas” specifically, it did squarely place this case within the “outer shell” of the law set forth in Bilski and Mayo. In doing so it articulated an approach that focuses not on finding the boundary line, but rather on the core properties of an ineligible patent claim. In Part I of this two-part post, I will focus on just the first step of the test, whether a claim recites a patent-ineligible “abstract idea.” In Part II, I’ll address issues regarding preemption, mental steps, and the application of Alice to software patents.
What the Supreme Court Did Not Do
To highlight how limited the decision is, I think it is best to quickly point out what the Court did not do. I will then go into a more detailed analysis of the decision and its context.
- The Court did not even mention “software” or “computer programs” or discuss the eligibility of software as a general matter. For all of the discussion about software technology by the parties and amici, the Court never goes into a discussion of what software is. This is particularly striking since Justice Thomas, the author of Alice, provided some technical discussion in his opinion in Association for Molecular Pathology, et al. v. Myriad Genetics, Inc., et al., 133 S.Ct. 2107 (2013). As I will discuss in the second part of this essay, the Court’s discussion about using a generic computer to implement a concept is not directed to software technology.
- The Court did not hold that all claims, or even all computer-implemented claims, necessarily contain an abstract idea.
- The Court did not mention anything about business methods. Indeed, the absence of any discussion of business methods is striking, given the nature of Alice’s invention, so much so that three justices had to file a concurrence to point out their view that business methods are never patent eligible. The need for the concurring opinion suggests that the majority opinion did not narrow eligibility for business methods.
- The Court did not rely upon the ad hoc rules against data gathering and pre- and post-solution activity as not contributing to patent eligibility, even though these “rules” are commonly cited by the Federal Circuit and many of the amici.
- The Court did not talk about “disembodied concepts,” “mental steps” or other formulations that have been used by the Federal Circuit and urged by amici.
- The Court did not mention patent trolls, the costs they are believed by some to impose on society, or the need to use Section 101 as a weapon against them.
- The Court did not mention any First Amendment considerations, such as “software is speech” as urged by the ACLU and others.
The Court’s opinion is relatively short, focused, and to the point, and avoids addressing issues that are not central to the question before the Court. For that, the patent community can be thankful.
Setting the Stage
To understand why Alice is a limited decision, it is necessary to consider the context of the Court’s opinion and specifically how the parties positioned and argued the case before the Court. The Court was very much focused on whether they were ruling on the patent eligibility of software in general or on just Alice’s patent claims, and at oral argument various members of the Court questioned the parties as to how they could rule in a way that did not touch upon software patent eligibility.
Alice positioned the case as one about the patent eligibility of computer-implemented patents—software patents—in general. Alice’s certiorari petition and merits brief focused on the general question of “Whether claims to computer-implemented inventions” are patent eligible, and argued in detail why computer-implemented inventions are not abstract ideas, providing the Court with a tutorial on software technology. See Brief of Petitioner Alice Corporation Pty. Ltd. at 35-43, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___ (2014) (No. 13-298). Likewise, many of the amicus briefs spent time discussing the nature of software technology and the eligibility of software generally, including the briefs by Microsoft, IBM, IEEE-USA and others. At oral argument, Alice further emphasized that their case was about software patents. Alice’s counsel Carter Philips argued that if the Court held software to be ineligible in the absence of making an improvement in the operation of the computer, “[w]hat we know is that this would inherently declare and in one fell swoop hundreds of thousands of patents invalid, and the consequences of that it seems to me are utterly unknowable,” Transcript of Oral Argument at 20, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___ (2014) (No. 13-298) (“Transcript”), borrowing heavily from Judge Moore’s concurring opinion that “if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1313 (Fed. Cir. 2013) (en banc) (Moore, J., dissenting-in-part).
On the other hand, CLS denied that the case was about software patents in general and denied that the patents-in-suit were software patents. In its Responsive Brief, CLS specifically argued that “The patentability of “software” is not presented in this case. Alice’s patents are not software patents—they do not explain how to configure a computer to perform the claimed methods.” Brief of Respondent CLS Bank Int’l at 11 n.1, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___ (2014) (No. 13-298). At oral argument CLS counsel Mark Perry told Justice Sotomayor “they have no software, first. They’ve never written software. They’ve never programmed a computer.” Transcript at 30. Perry further emphasized that the Alice’s invention was a very small part of the overall patent, “It’s less than five pages in the printed appendix that actually pertains to this invention. And it contains no disclosure whatever.” Id. at 32. Perry argued that the Court’s decision would not impact a large swath of patents: “We are talking about a group of patents, Justice Kagan, that’s way out at the tail end of distribution. Most patents never have a 101 challenge . . . . This is a problem for the most marginal, most dubious, most skeptical patents.” Id. at 44. CLS’s argument has very clear implications: not every patent claim reciting the use of a computer is a software patent. Rather, real software patents are a much narrower type, they describe “how to configure a computer to perform” a specific method. This is the key to the Court’s analysis.
Unfortunately, Phillips unintentionally reinforced the view that a software and computer implementation was not that significant for Alice’s patent claims. First, at the beginning of oral argument Justice Kennedy asserted that a second-year college class in engineering could program Alice’s invention over a weekend, “that would be fairly easy to program,” to which Phillips replied “I don’t disagree with it,” id. at 5, and then later “Well, that’s absolutely, I’m certain that’s true.” Id. at 12. Then later on, Justice Ginsburg picked up on CLS’s argument that Alice’s patents were not really software patents, that they were simply applying a computer to a general idea, asking Philips “There is no special software that comes with this that’s part of this patent, is it is there?” Id. at 13. Philips admitted that there was no code in the patent, only an identification of “the functions that you want to be provided for with the software.”
Justice Kagan also returned to the theme of whether merely using a computer to implement a simple idea was patent eligible, asking Mr. Philips about whether thirty years ago the founders of the Internet could have patented “essentially tak[ing] the process of mail order catalogues and making it electronic.” Id. at 25-26. Phillips here replied that he could write claims for such an invention that would satisfy Section 101—and then unnecessarily admitted that “to the extent you’d think those are no different than the ones I have here, then my argument is simply I think I satisfy 101 with the claims we have before us.” Id. at 26.
Justice Sotomayor put the question of software eligibility directly to the Solicitor General, asking “Do you think we have to reach the patentability of software to answer this case?” Id. at 46. The Solicitor General replied “I think the answer to that question is no, not necessarily,” and then laid out in general terms the same reasoning that the Court ultimately adopted, that “ Bilski answers the question whether this is an abstract idea” and “Mayo answers the question of whether the use of a computer in this case adds enough to the abstract idea beyond conventional steps.” Id.
Read in this light, the intent and the scope of the Court’s decision is clear. The Justices were looking for a way to invalidate Alice’s patents without ruling that software is per se ineligible. They did not accept that Alice’s patents were complex, inherently computer-implemented methods. Instead, they accepted CLS’s framing of the Alice patents—that these were not really software patents at all, since a real software patent describes how to configure a computer to do something, not merely saying use a computer to do something. They apparently believed that Alice’s patents were outliers, part of “the tail end of distribution” of patents, not part of the “hundreds of thousands” of patents that would be invalidated by a general ruling against software patents. And they accepted the Solicitor General’s argument that they did not need to reach the eligibility of software, as evidenced by their adoption of the government’s overall position, that Bilski and Mayo entirely answer the question before the Court.
The Decision Deconstructed
I now turn to the Alice decision itself. The Court’s primary concern is that a patent should not “preempt” “fundamental concepts,” ideas that are “building blocks” of “human ingenuity” and “modern commerce.” Thus, the judicial exceptions to § 101—restrictions on patenting laws of nature, natural phenomenon, and abstract ideas—are used to prevent patents on these types of ideas. “We have described the concern that drives this exclusionary principle as one of pre-emption,” and “We have repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.” Alice,slip op. at 4-5.
The court emphasizes that role of § 101 is to prevent patents only on “building blocks,” and not on just any application of an abstract idea: “At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. At some level, ‘all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.’ Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept . . . . Accordingly, in applying the §101 exception, we must distinguish between patents that claim the ‘buildin[g] block[s]’ of human ingenuity and those that integrate the building blocks into something more.” Id. at 6. This is a key point: The Court recognizes that the presence of an abstract concept is not fatal, precisely because all inventions rely on them. Thus, proper application of § 101 requires a differentiation between the kinds of abstract ideas that the Court is worried about, and the kinds of abstract ideas that are necessarily part of all invention.
Doing the Two-Step
To implement § 101 to distinguish in this fashion, the Court uses a two step approach. “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, we then ask, ‘[w]hat else is there in the claims before us?’” Id. at 6. It is important to note here the specific phrasing of the first question. The question is whether there is abstract idea in the claim—and not what is the abstract idea in the claim. This is a critical distinction, and one that is easily overlooked. Asking whether there is an abstract idea implicated by a claim makes no assumptions and allows for the possibility that there was no abstract idea implicated by the claim at all. In that event, the claim obviously satisfies § 101.
By contrast, asking what is the abstract idea in the claim begs the question and assumes that there is an abstract idea in the claim to begin with, an assumption that easily leads down the path to ineligibility. Arguably, this is error was made in the Federal Circuit’s en banc plurality opinion: “As described, the first step in that analysis requires identifying the abstract idea represented in the claim.” CLS, 717 F.3d at 1286 (Lourie, J. concurring). Thus, both patent examiners and the courts must be careful not to assume that every claim for a computer-implemented method or system necessarily incorporates an abstract idea, but must instead investigate whether it in fact does.
The Court goes on to find that Alice’s claim did recite an abstract idea of intermediated settlement. Yet, the Court also avoids attempting any definition of “abstract idea”:
In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of ‘abstract ideas’ as we have used that term.
Alice, slip op. at 9 (emphasis added).
At first glance, this appears to be a massive punt, since the definition of an abstract idea has been a central problem in the law since Gottshalk v Benson,and is what essentially led to Bilski and then eventually this case. But perhaps the Court did not punt. Contrary to the lament that “no one understands what makes an idea ‘abstract,’”, there is a considerable philosophical literature on the nature of abstract ideas. Our amicus brief for Advanced Biological Laboratories offered a general description of an abstract idea, and a technology-independent way of determining whether there is an abstract idea in a patent claim, and other amici likewise proposed definitions and explanation.
But the Court did not turn to any of these extra-legal definitions of an abstract idea. Instead, the Court has clearly announced that “abstract ideas” is special legal term—like willful infringement or inducement—and has nothing to do with the general linguistic, philosophical or common uses of the phrase:
Both [referring to the concepts implicated by the claims in Bilski and Alice] are squarely within the realm of “abstract ideas” as we have used that term.
Putting abstract ideas in quotes, and then stating “as we have used that term” indicates that the Court is now and (in a 1984-ish sort of way) always has been, using this term to mean something specific and distinctive from its ordinary dictionary meaning. Let’s call this Abstract Ideas, with a capital A and a capital I. This is similar to the “big-C” Creativity, described by the psychologist Mihaly Csikszentmihalyi as the kinds of activities that change some aspect of the relevant culture itself: “To have any effect, the idea must be couched in terms that are understandable to others, it must pass muster with the experts in the field, and finally it must be included in the cultural domain to which it belongs.” Mihaly Csikszentmihalyi, Creativity: Flow and the Psychology of Discovery and Invention 27 (1996).
Like big-C Creativity, which is different from little-c creativity—being a creative person, making a creative floral arrangement or creative limerick, or even inventing a new gadget, machine, or software app—for the Court, Abstract Ideas are necessarily “building blocks” and “fundamental” to the culture or the “modern economy,” are “the basic tools of scientific and technological work.” These are not the ordinary types of abstract ideas that are essential to every invention. Instead, they are what Justice Breyer called the “big ideas,” basic to a given domain in science or commerce. (“Business methods are similarly often closer to “big ideas,” as they are the basic tools of commercial work.” Bilski, 130 S.Ct. 3218, 3255 (Stevens, J. concurring). The Court’s methodology then is to look for evidence that the claim recites something that is “fundamental” enough to qualify as an Abstract Idea in “as [they] have used the term.” In Bilski the claim was plainly on the “fundamental economic practice” of hedging, something “long prevalent in our system of commerce and taught in any introductory finance class”—that is something core to cultural domain of finance. In Benson, the Court believed (wrongly it turned about, but that’s beside the point) that the claims covered the basic algorithm for converting binary coded decimal to binary, something that appeared “fundamental” to the domain of computer science and mathematics. Similarly, in Mayo, the Court believed (again, wrongly, but again that’s beside the point) that Prometheus’s claim covered a so-called “law of nature,” something “fundamental” to the domain of medicine and biology. (It’s ok that the Court was wrong on the facts in Benson and Mayo, because what really matters for the future application of § 101 is the methodology and underlying theory, not the specific facts.)
In Alice, the Court stated that “on their face” the claims are “drawn to concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk,” which is also a “fundamental economic practice,” again core to cultural domain of contracts. Alice,slip op. at 8. The Court then links the “fundamental” notion to the “building block” notion: “The use of a third-party intermediary (or ‘clearing house’) is also a building block of the modern economy.” Id.And as if the explanation of Abstract Ideas as being “fundamental practices” is not plain enough, the Court repeats it just one page later to defeat Alice’s argument that abstract ideas must be “pre-existing, fundamental truths” that exist independently of human action: “Although hedging is a longstanding commercial practice, it is a method of organizing human activity, not a ‘truth’ about the natural world . . . the Court [in Bilski] grounded its conclusion that all of the claims at issue were abstract ideas in the understanding that risk hedging was a ‘fundamental economic practice.’” Id. at 9 (internal citation omitted).
As I stated as the outset, the key to understanding the Court’s opinion is that it did not view Alice’s patents as software patents at all, but instead as patents on an Abstract Idea itself. Going back to the oral argument, Alice did little to convince the Court that its invention was a true software invention and not an Abstract Idea. Telling the Court (inaccurately, no less) that Alice’s system could be programmed by group of graduate students “sitting around a coffee shop in Silicon Valley . . . over a weekend” was a critical error. By arguing to Justice Kagan that claims to using a computer to order products electronically over the Internet would be patent eligible, Alice suggested that it needed a rule broad enough to cover an obviously (to Justice Kagan) ineligible “fundamental building block” in order to support its own patent claim—which by logical extension was also an ineligible Abstract Idea. In contrast, CLS offered a much more limited, and reasonable position: that Alice’s patents were not software patents, and that software really was not at issue in this case, a position that I believe the Court implicitly adopted. Justice Sotomayor said it best: “There is no software being patented in this case.” Transcript at 46. The Court’s opinion then is not about software patents, and it never holds up Alice’s patents as exemplary of that class. Rather, the opinion is about patents on the kinds of Abstract Ideas I have described above.
CLICK HERE to CONTINUE READING… In the next post, I will discuss how this analysis ties into issues of preemption, mental steps and the application of Alice to software patents.
About the Author
Robert Sachs concentrates his practice on strategic patent counseling and prosecution for software technologies. Bob has extensive experience in developing patent portfolios for companies of all sizes, from startups to multi-nationals. He is the primary evaluator for standards essential patents on today's most important audio, video, and communications technologies, including 3GPP-LTE, IEEE 802.11, MPEG-4 AAC, MPEG-4 USAC, DVB-MHP, OCAP, Digital Radio Mondiale, AMR-NB, AMR-WB, AMR-WB+, G.711, G.729, and NFC-IP. He conducts and supervises evaluations for standards essential patents in US, as well as Europe, Japan, China, South Korea, Mexico and Canada.
Bob also writes the Bilski Blog, focusing primarily on the law of patent eligible subject matter.
* The views and opinions expressed herein are my own, and not those of Fenwick & West LLP, or any of its clients.