PATENTS AND TRADEMARKS

After Supreme Court Clamps Down on Patents, Some New Guidance

New guidance from the U.S. Patent Office could open the door to a flood of litigation.
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Following last week's Supreme Court decision affecting patentability of business processes and abstract ideas, the U.S. Patent Office has issued initial guidance for examiners on how they should proceed with these types of patents.

Last week's decision in Alice Corp. v. CLS Bank International involved limiting the patentability of certain types of business processes such as billing sytems or the establishment of escrow accounts. The scope of the decision would extend to, say, a tech company's ability to patent diferent types of software, among other things.  

As a response, the patent office offered new guidance. Though preliminary and open to public comments until the end of July, it effectively consolidates a somewhat more disparate approach previously in effect. The guidance suggests it will now become harder for people applying for patents for certain kinds of technology ideas. 

"For people who are applying for patents in the business method area, they will need to try harder in their patent applications to show that their invention is either applicable to some other technology besides the business method, or that it improves the functioning of the computer itself," says James T. Carmichael, a principal and patent attorney with Miles & Stockbridge, in Washington, D.C., and a former USPTO administrative patent judge and associate solicitor.

The Supreme Court decision in question stemmed from a suit brought by Australia-based Alice Corp., which patented a software process in the late 1990s that essentially computerized how funds in a financial transaction are guaranteed through an escrow account. It sued CLS Bank, based in England, which uses a similar process, though of its own invention, for the many foreign exchange transactions it conducts.

The idea of holding funds in escrow is many hundreds of years old, legal experts have said, and the Supreme Court ruled that simply applying a new technology to an older concept was not a patentable idea.

Prior to Alice Corp., the USPTO relied on two legal precedents, one called Bilski, for businesses processes, and one called Mayo, for products. 

According to the USPTO guidance:

  • Alice Corp. establishes that the same analysis should be used for all types of judicial
    exceptions, whereas prior USPTO guidance applied a different analysis to claims with abstract
    ideas (Bilski guidance in MPEP 2106(1I)(B)) than to claims with laws of nature (Mayo
    guidance in MPEP 2106.01).
  • Alice Corp. also establishes that the same analysis should be used for all categories of
    claims (e.g., product and process claims), whereas prior guidance applied a different analysis to
    product claims involving abstract ideas...than to process claims. 

The High Court justices also relied heavily on Bilski and Mayo when they made their decision last week. In general terms, their decision said business processes and products that involve abstract ideas can't be patented unless they improve the specific functioning of a computer or some other technology or technological field.

An area for concern in the guidance, Carmichael says, lies in the section on "meaningful limitations," which effectively make an abstract idea patentable. In addition to limitations that improve technology or technical fields, or the improvement of the functioning of a computer, the guidance includes "meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment."

That vagueness of that language could open up a can of worms for future patent litigation, Carmichael says.

"The Supreme Court did not actually say this would be enough to confer patentability," Carmichael says.

The Alice Corp. case has always been a complicated one. On appeal at the U.S. Court of Appeals for the Federal Circuit, which hears patent cases before they head to the Supreme Court, the case essentially stumped the justices, who issued six different opinions in July, 2012.

Final guidance from the USPTO may not be issued until the end of 2014 or sometime in early 2015, a USPTO spokesman said.

IMAGE: Getty Images
Last updated: Jun 26, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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