Recently, courts have invalidated patents for claiming “abstract” ideas or business methods under Section 101 of the patent laws as applied in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014). The Court reasoned that taking a method that is “abstract” — practiced in the prior art “manually,” without a computer – and just performing it on a computer without adding new elements, is not patentable under 101.

In the year since that decision, vast numbers of patents have not only been swept away in litigation, but were never even granted in the first place by the USPTO.

Not surprisingly, Alice has been roundly attacked by the patent bar as well as by prominent bloggers. While many of these attacks take aim at the policy assumptions behind Alice, a great many also question the decision’s clarity, arguing that it is impossible to parse what the Court actually means when it seeks to define an “abstract” idea.

Now, however, some recent decisions demonstrate that courts are taking a more nuanced approach that could reduce the carnage, not least by explaining what is not abstract.

See, for example, Ttechnology-computer-chips-gigabyterading Techs. Intern., Inc. v. CQG, Inc., 2015 U.S. Dist. Lexis 5938 (N.D. Ill. 2015) (finding the claim at issue was not “directed to a mathematical algorithm” nor “a fundamental economic or longstanding commercial practice… as electronic trading has only been viable for a couple of decades, and its analog predecessor, open outcry trading systems, operate in a significantly different fashion”). This would allow an electronic trading exchange which is not just another mathematical algorithm of the type routinely rejected under Alice, and not just a somewhat updated version of a longstanding economic practice.

See also DDR Holdings, LLC v., L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014) (finding claims patent eligible and noting “[a]though the claims address a business challenge (retaining website visitors), it is a challenge particular to the Internet”). The Court’s language regarding particularity to the internet is crucial. While it is not enough merely to use a computer to pass the Alice test, the court appeared to sanction situations where a processor (who has also a new, inventive element) is connected to other computers and meets a “challenge” that could only arise on the internet.

If this type of nuanced thinking continues, then the 101 patent eligibility test will have to take into account a claimed method/process that “necessarily” requires a computer for its practical implementation, e.g., real-time processing of a data stream with any action taken to be conditioned on the content. It will have to solve a problem particularly related to the internet — one that could not have arisen but for the internet. Any such solution is not the same as just automating a method that was previously practiced manually, that is, it is not the type of “abstract idea” no longer viable under Alice.

This trend – if it is one – affirms that “real” IP law is not made by the Supreme Court, but by lower courts that have to deal (day in and day out) with actual business practices. These courts do not have the luxury of being “abstract.”

Fordham IP Institute