Enter, then, Bilski, whose patent application for a method of hedging against the risk of price changes in commodities markets was rejected by the USPTO and the Federal Circuit as being directed to unpatentable subject matter. Bilski, 561 U.S. at 599–600. In affirming, the Supreme Court held that business methods are not categorically excluded from patentability. The conclusion was fairly inescapable. As the Court noted, reading business methods into the exceptions to section 101 would render the section 273 defense meaningless. But also recognizing that section 273 “does not suggest broad patentability,” the Court proceeded to throw the patentability of many business methods into question by finding Bilski’s invention unpatentable as an “abstract idea” because “‘[h]edging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.’” Bilski, 561 U.S. at 608, 611 (quoting In re Bilski, 545 F.3d 943, 1013 (Fed. Cir. 2008) (Rader, J., dissenting)).
Having failed in Bilski to articulate an analysis for distinguishing patent-eligible from patent-ineligible inventions, the Court interjected itself into the debate again, just two years later, in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). Unlike Bilski, the patents at issue in Mayo were directed to a method of optimizing the treatment of certain gastrointestinal disorders and, more specifically, to the steps of: administering to a patient a drug providing a certain metabolite (6-thioguanine, or “6-TG”); determining the level of the metabolite thereafter present in the patient; and adjusting (up or down) the amount of the drug subsequently given to the patient in light of the level of the metabolite as determined in the second step. Quite rightly, the Supreme Court recognized these steps as encompassing one of the judicial exclusions to patentable subject matter—a law of nature:
Prometheus’ patents set forth laws of nature—namely, relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm. Claim 1, for example, states that if the levels of 6-TG in the blood (of a patient who has taken a dose of a thiopurine drug) exceed about 400 pmol per 8x10^8 red blood cells, then the administered dose is likely to produce toxic side effects. 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 relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes.
Mayo, 132 S. Ct. at 1296–97. In light of this recognition, the Court proceeded to frame the question for resolution as “whether the claims [of the Prometheus patents] do significantly more than simply describe these natural relations.” Mayo, 132 S. Ct. at 1297. Considering its own precedent as standing for the proposition that patent-ineligible subject matter cannot be rendered patent-eligible by the mere act of appending (to claims reciting laws of nature or abstract ideas) activities that are well-known or conventional, the Court went on to conclude that the Prometheus patents were invalid under section 101:
Beyond picking out the relevant audience, namely those who administer doses of thiopurine drugs, the claim simply tells doctors to: (1) measure (somehow) the current level of the relevant metabolite, (2) use particular (unpatentable) laws of nature (which the claim sets forth) to calculate the current toxicity/inefficacy limits, and (3) reconsider the drug dosage in light of the law. These instructions 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. And since they are steps that must be taken in order to apply the laws in question, the effect is simply to tell doctors to apply the law somehow when treating their patients.
Mayo, 132 S. Ct. at 1299–1300. Perhaps because the Mayo analysis was applied to the far more easily identifiable “laws of nature” exception to section 101, the Supreme Court chose to wrestle with patentable subject matter only a year later in a case with considerable analogy to Bilski. In Alice Corp. Pty., Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), the petitioner owned patents directed to the intermediated settlement of financial obligations. The patents’ claims recited each of such a method devoid of computer implementation, as well as a computer system and software for implementing the method.
The Court first characterized its Mayo decision as setting forth the following two-part analysis for addressing section 101 patent eligibility: “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts [laws of nature, natural phenomena, and abstract ideas]. If so, we then ask, ‘[w]hat else is there in the claims before us?’” Alice, 134 S. Ct. at 2355 (citations omitted). Unsurprisingly, given the similarity between the claims at issue in Alice and those in Bilski, the Court concluded for essentially the same reason that the Alice patents claimed an abstract idea:
On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “a fundamental economic practice long prevalent in our system of commerce.” [S]ee, e.g., Emery, Speculation on the Stock and Produce Exchanges of the United States, in 7 Studies in History, Economics and Public Law 283, 346–56 (1896) (discussing the use of a “clearing-house” as an intermediary to reduce settlement risk). The use of a third-party intermediary (or ‘clearing house’) is also a building block of the modern economy. See, e.g., Yadav, The Problematic Case of Clearinghouses in Complex Markets, 101 Geo. L.J. 387, 406–12 (2013); J. Hull, Risk Management and Financial Institutions 103–04 (3d ed. 2012). Thus, intermediated settlement, like hedging, is an “abstract idea” beyond the scope of section 101.
Alice, 134 S. Ct. at 2356. Addressing the “something more” requirement, the Court again distilled its relevant precedent, this time into support for the notion that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” Alice, 134 S. Ct. at 2358.
Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Mayo, [132 S. Ct. at 1294]. Nor is limiting the use of an abstract idea “to a particular technological environment.” Bilski, [561 U.S.] at 610–11. Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” Mayo, [132 S. Ct. at 1301], that addition cannot impart patent eligibility.
Alice, 134 S. Ct. at 2358. Finding that the Alice patents’ claims amounted to no more than just such an instruction to implement the “abstract” method on a “generic computer” performing “generic computer functions,” the Court held the patents patent-ineligible under section 101. Alice, 134 S. Ct.at 2359.
On its face, the analysis—at least as articulated in Alice—seems easy enough to apply. One need only answer two questions: Does the claimed invention recite an abstract idea, law of nature, or natural phenomena? If so, does the claim add “something more” to transform the invention into more than just an effort to patent the excluded category? In practice, however, application of the analysis is vexing for several reasons.
The most immediately troubling aspect of the section 101 analysis is in its application to “abstract ideas.” “Laws of nature” and “natural phenomena,” as Mayo illustrates, are easier to identify because they exist independent of human conception. Which is to say, “laws of nature” and “natural phenomena” may only be discovered and not invented. The same is not true of “abstract ideas,” at least insofar as the case law is concerned. “Hedging” and “mediating financial settlements” are human constructs. But in none of its recent cases does the Supreme Court attempt to define what an “abstract idea” is, other than by implication. The very moniker “abstract idea” is perplexing and unhelpful.
An “idea” is “a thought, plan, or suggestion about what to do.” Idea, Merriam-Webster, (last visited June 5, 2015). To this, the qualifying adjective “abstract”—which comprehends something “[e]xisting in thought or as an idea but not having a physical or concrete existence,” Abstract, Oxford Dictionaries, (last visited June 5, 2015)—is simply redundant. An “abstract idea” is, if anything, simply an idea having an even less concrete form. Yet the allegedly “abstract ideas” of Bilski and Alice manifestly have concrete form. And, in any case, the degree of definiteness was not what disqualified the subject matter of the claims in either Bilski or Alice. It was, instead, the fact that both comprehended methods that were old and well-known practices: “fundamental economic practice[s] long prevalent in our system of commerce.” Alice, 134 S. Ct. at 2356. How this “long prevalence” transforms a practice into an “abstract idea” is unclear. What is clear is that it more nearly disqualifies the claimed inventions from patentability under two other hurdles imposed by the Patent Act: section 102’s and 103’s requirements that claimed invention be new and nonobvious.
An equally troubling aspect of the Alice analysis—and one with applicability to each of section 101’s judicial exceptions (and not just “abstract ideas”)—is that the “something more” requirement exists uncomfortably with the novelty and nonobviousness requirements of section 102 and 103. Even under the contemporary obviousness analysis framed by the Supreme Court’s decision in KSR International Co. v. Teleflex, Inc., 550 U.S. 398, 418 (2007), it is possible to patent a combination of old elements if the combination would not have been obvious to one of ordinary skill in the art. In view of this, it seems contrary to tie the patent-eligibility of subject matter under section 101 to the recitation of “something more” than what might otherwise entitle a claimed invention to patentability.
The Supreme Court itself recognizes this tension between excepting “abstract ideas” from section 101 while its precedent implicitly confirms that an abstract idea, natural law, or natural phenomena can in some instances be rendered patentable:
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. Mayo, 132 S. Ct. at 1301 (citing Morse, [56 U.S.] at 113). At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. Mayo, 132 S. Ct. at 1293–94. At some level, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Id. at 1293. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U.S. 175, 187 (1981). “[A]pplication[s]” of such concepts “to a new and useful end,” we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U.S. 63, 67 (1972).
Alice, 134 S. Ct at 2354–55. As this article has attempted to demonstrate, however, the existing analysis does an unsatisfactory job of dealing with the tension by leaving unanswered the fundamental question “what is an abstract idea?” while creating a potentially higher burden for the patentability of inventions directed to section 101’s judicial exceptions. Instead, the question of patentability as to such inventions appears—and the Supreme Court’s decisions in each of Bilski, Mayo, and Alice bear this out—far more easily resolved under section 102 and 103.
For the time being, the law as it stands represents a powerful weapon in the arsenal of any infringement defendant faced with patent claims directed to method or system claims. Conversely, it creates considerable uncertainty as to the patentability of, or the ultimate validity of patents comprehending, such inventions. Already, early evidence suggests a marked decrease—by as much as two-thirds—in the allowance of business method patents. Until the law either settles on what, in fact, qualifies a method as “abstract,” or otherwise jettisons the category altogether from the list of judicial exceptions to section 101, that uncertainty will, for better or worse, doubtless curtail efforts to patent and enforce such inventions.
Keywords: litigation, intellectual property, patentability, novelty, nonobviousness, laws of nature, natural phenomena, abstract ideas, business method patents