, in Alice v. CLS Bank (June 2014), the US Supreme Court seems to have provided no additional guidance of what is patentable subject matter – especially in the context of software and business method patents. Rather, the Supreme Court relied heavily on its earlier opinion in Mayo v. Prometheus (2012) to seemingly just reiterate the principles therein. In Alice, the US Supreme Court found invalid patent claims to reducing the risk that only one party to a financial transaction will perform. The claims were nothing beyond an abstract idea.

1. Page 1 of 3
© Michael A. Shimokaji, 2014
The contents of this article represent the opinions of the author and not those of the
author’s law firm or clients.
HAS THE US SUPREME COURT FINALLY KILLED BUSINESS
METHOD PATENTS AFTER ALICE v. CLS BANK?
It may not appear so.
In fact, in Alice v. CLS Bank (June 2014), the US Supreme Court seems
to have provided no additional guidance of what is patentable subject matter
– especially in the context of software and business method patents. Rather,
the Supreme Court relied heavily on its earlier opinion in Mayo v. Prometheus
(2012) to seemingly just reiterate the principles therein.
In Alice, the US Supreme Court found invalid patent claims to reducing
the risk that only one party to a financial transaction will perform. The claims
were nothing beyond an abstract idea.
An exemplary patent claim stated the following:
(a) creating a shadow credit record and a shadow debit record for each
stakeholder party;
(b) obtaining from each exchange institution a start-of-day balance;
(c) the supervisory institution allowing only these transactions that do
not result in the value of the shadow debit record being less than the
value of the shadow credit record at any time, and
(d) at the end-of-day, the supervisory institution instructing the
exchange institutions to exchange credits or debits to the credit record
and debit record of the respective parties.
Michael Shimokaji
www.shimokaji.com
949-788-9968

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© Michael A. Shimokaji, 2014
The contents of this article represent the opinions of the author and not those of the
author’s law firm or clients.
Prior to reaching the US Supreme Court, the Federal Circuit twice heard
the matter. Upon its first review, the Federal Circuit found the claims to be
valid.
On its second review, before the entire court en banc, the Federal
Circuit found the claims to be invalid. “The concept of reducing settlement
risk by facilitating a trade through third-party intermediation is an abstract
idea because it is a ‘disembodied’ concept.” The analysis therefore turns to
whether the balance of the claim adds "significantly more." “Apart from the
idea of third-party intermediation, the claim's substantive limitations require
creating shadow records, using a computer to adjust and maintain those
shadow records, and reconciling shadow records and corresponding exchange
institution accounts through end-of-day transactions. None of those
limitations adds anything of substance to the claim.”
In Alice, the Supreme Court started by explaining that “[l]aws of nature,
natural phenomena, and abstract ideas are not patentable.” Yet, they
recognized that all inventions embody “at some level” the foregoing matters
that are not patentable.
The Supreme Court relied on its prior two-step analysis in Mayo. First,
are the claims directed to a patent-ineligible concept - laws of nature, natural
phenomena, and abstract ideas? If so, then second, do additional claim
elements transform the claims into patent eligible matter - something
"significantly more" than the ineligible concept.
Reducing settlement risk via a third party intermediary was, according
to the Supreme Court, a "fundamental economic practice" and therefore an
abstract idea. Yet, the Court refused to define the "precise contours" of an
abstract idea.
Under the second Mayo step, the Supreme Court noted that adding
conventional steps is insufficient to raise the level of the claims to an inventive
concept. Nor is the addition of a generic computer. A technological
environment is also insufficient.
In this case, according to the Supreme Court, the computer performs
"purely conventional" steps. In other words, a generic computer performs

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© Michael A. Shimokaji, 2014
The contents of this article represent the opinions of the author and not those of the
author’s law firm or clients.
generic computer functions.
COMMENT:
Simply tying functional steps to a computer would not appear to
overcome the Alice requirements. Likewise, combining long established
fundamental concepts with a computer would not appear sufficient.
What could be sufficient to overcome the Alice requirements is a new
feature added to a fundamental business concept. Or, it could be the
refinement of a step in a fundamental business concept, or perhaps even the
elimination of a fundamental step.