Today, the Supreme Court handed down another monumental patent decision interpreting the scope of 35 U.S.C. §101 and case precedent, holding that method claims for a computer-implemented process for mitigation of settlement risk are not patent eligible subject matter. In Alice Corp. v. CLS Bank International, a unanimous court applied several recent cases in its decision: Association for Molecular Pathology v. Myriad Genetics (2013), Mayo Collaborative Services v. Prometheus Laboratories (2012) and Bilski v. Kappos (2011). The representative method claim recites the following steps:
(1) “creating” shadow records for each counterparty to a transaction; (2) “obtaining” start-of-day balances based on the parties’ real-world accounts at exchange institutions; (3) “adjusting” the shadow records as transactions are entered, allowing only those transactions for which the parties have sufficient resources; and (4) issuing irrevocable end-of-day instructions to the exchange institutions to carry out the permitted transactions.
Justice Thomas framed the relevant question for the court as “whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” He responds, “[t]hey do not.” An excerpt from the syllabus succinctly analyzes the reasoning of the court:
Here, the representative method claim does no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. Taking the claim elements separately, the function performed by the computer at each step—creating and maintaining “shadow” accounts, obtaining data, adjusting account balances, and issuing automated instructions—is“[p]urely ‘conventional. ’ ” Mayo, 566 U. S., at ___. Considered “as an ordered combination,” these computer components “ad[d] nothing . . . that is not already present when the steps are considered separately.” Id., at ___. Viewed as a whole, these method claims simply recite the concept of intermediated settlement as performed by a generic computer. They do not, for example, purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field. An instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not “enough” to transform the abstract idea into a patent-eligible invention.
Understanding the case requires a look into the patent statute, and the Supreme Court case law. The patent statute sets forth that patents may be issued to “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter.” 35 U.S.C. §101. Process claims, more commonly referred to as method claims, are defined by the United States Patent and Trademark Office (USPTO) in its Manual of Patent Examining Procedure §2106 as “an act, or a series of acts or steps.” The Supreme Court through case law has excluded from patentable subject matter under §101 “[l]aws of nature, natural phenomena, and abstract ideas.” Anything falling within these three categories is deemed “part of the storehouse of knowledge of all men…free to all men and reserved exclusively to none.” Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948).
Over one hundred years of Supreme Court precedent applies these exclusions — laws of nature, natural phenomena, and abstract ideas — to a variety of contexts. However, recent advancements in technology have raised complicated questions about the bounds of the excluded categories. Prior to today’s decision in Alice Corp. v. CLS Bank, three recent high profile Supreme Court decisions apply this patentable subject matter precedent to several modern day technologies. The first case in the trilogy, Bilski v. Kappos (2010), involved patent claims related to the interaction of buyers and sellers of commodities in the energy market and hedging against the risk of price fluctuations. The two method claims at issue in the case together “describe a series of steps instructing how to hedge risk” through transactions between commodity providers, consumers, and market participants and “put the concept…into a simple mathematical formula.” For example, claim 1 laid out the following steps:
(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers; (b) identifying market participants for said commodity having a counter-risk position to said consumers; and (c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.
The USPTO rejected the claims because they involved “mental steps that do not transform physical matter and [were] directed to an abstract idea.” The Court agreed, finding the claims drawn to an abstract idea and thus not patentable subject matter.
The second case, Mayo Collaborative Services et al. v. Prometheus Laboratories (2012), involved method claims to aid doctors in prescribing thiopurine drugs to patients with autoimmune diseases. The claims before the court involve a three-step process, essentially measuring levels of 6-TG, reading the levels, and determining whether an administered dose is likely to produce toxic side effects. For example, claim 1 of the patent describes one of the claimed processes as follows:
A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising: (a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.
The Court concluded that the claimed processes do not transform a non-patentable natural law into a patent eligible application of those laws. The Court stated that “while it takes a human action (the administration of a thiopurine drug) to trigger a manifestation of this relation in a particular person, the relation itself exists in principle apart from any human action.” The relationship is an entirely natural process and the patent claim simply describes the relationship. According to the Court, a patent claim must “add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws.” The method claims failed because the instructions were a phenomenon of nature, which “add nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field.”
The Supreme Court examined a similar set of facts six years earlier. The case, Laboratory Corporation of America Holdings v. Metabolite Laboratories (2006), was ultimately dismissed by the court as improvidently granted because the patentable subject matter claim had not been raised in the lower court. However, three Justices authored a strong dissent to the dismissal on the grounds that the court had been properly briefed by the parties on the issue and that it raised a major question for health care and medical research. The method patent claim in the case covered a “method of detecting a cobalamin or folate deficiency” consisting of “assaying a body fluid” and “correlating an elevated level of total homocysteine” with a deficiency in either cobalamin or folate. Justices Breyer, Stevens, and Souter urged that such a “correlating” step necessarily involved a natural phenomenon and was thus not patentable. Though not binding precedent, this earlier case helped set the stage for Mayo Collaborative Services v. Prometheus. The “correlating” step is similar to the “determining” step, mainly instructing the user to obtain a test result and think about it in making a treatment decision.
The third case, Association for Molecular Pathology, et al. v. Myriad Genetics (2013), challenged the validity of composition of matter claims issued by the USPTO for isolated sequences of DNA associated with predisposition to breast and ovarian cancers. Claims to both isolated genetic sequences and complimentary DNA (cDNA) were at issue, along with methods for comparing BRCA1 and BRCA2 gene sequences to identify the presence of mutations correlated to a predisposition to breast or ovarian cancer. Claim 1 of the patent asserts a claim for “[a]n isolated DNA coding for a BRCA1 polypeptide,” which has “the amino acid sequence set forth in SEQ ID NO:2.” SEQ ID NO:2 sets forth a list of 1,863 amino acids that the typical BRCA1 gene encodes. The Supreme Court determined that an isolated segment of naturally-occurring DNA is a product of nature and is not patentable. The Court concluded that Myriad did not create or alter the genetic information of the genes or the genetic structure of the DNA. The Court deemed the BRCA1 and BRCA2 genes important, but held that “groundbreaking, innovative, or even brilliant discovery” does not satisfy the requirements of utility. Despite the degree of difficulty and amount of work performed, the Court held that “extensive effort alone is insufficient.” The Court also held that cDNA, however, is not a naturally-occurring product of nature and is patentable.