Intellectual Property Protection

Intellectual Property Protection

by Intellectual Property Attorney Bill Honaker, the IP Guy

A riddle wrapped in a mystery inside and enigma . . .

Alice v. CLS Bank

On June 19, 2014 dramatic changes came to the United States Patent system in general, and the section that protects computer software in particular.  The Supreme Court decided Alice v. CLS Bank, holding that patent claims to a computer-implemented electronic escrow service for facilitating financial transactions covered abstract ideas and were ineligible for patent protection.

The court held that the claims were drawn to a known system for mitigating settlement risks in financial transactions. The only difference was the use of a computer to perform the known functions.

The Alice case involved the application of §101 of the patent laws, which defines what can be patented. The court noted that, “This provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” These are the building blocks of human ingenuity and cannot be owned by anyone. But, the Court also recognized that at some level, “all inventions embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”

Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. Applications of such concepts, “to a new and useful end,” remain eligible for patent protection.

The Alice Two Part Test

The Supreme Court applied a two-part test.  First, are the claims directed to a patent-ineligible concept; and if so, do the claim’s elements, considered both individually, and “as an ordered combination,” “transform the nature of the claim” into a patent-eligible application. Many complained that the guidance by the Supreme Court was vague at best.

The Effect on Computer Patents

It was reported by the Journal of the Patent & Trademark Office Society (JPTOS) that a year after Alice, the average invalidity rate for software patents stood at 82.9%. After two years, the average invalidation rate was 66.5%. Articles abounded about the death of computer-related patents, and the confusion wrought by the Supreme Court.

Almost 5 years later

Now, almost five years later, the confusion continues, but several decisions have cleared some of the fog. Sir Winston Churchill’s famous quote ended with, “but perhaps there is a key. That key is Russian national interest.” With our riddle, the key is identifying and claiming the “new and useful end,” and recent decisions have made the path a little less foggy.


One of the most recent decisions is Berkheimer v. HP, wherein the Court of Appeals for the Federal Circuit stated that, “The second step of the Alice test is satisfied when the claim limitations “involve more than performance of well-understood, routine, and conventional activities previously known to the industry.” The Court held that this is a fact question.

Berkheimer involved a system that parses files into multiple objects, and tags the objects to create relationships between them. The patent disclosed and claimed that the system eliminates “redundant storage of common text and graphical elements, which improves system operating efficiency, and reduces storage costs.” This improved efficiency and reduced cost was enough to overcome the lower Court’s declaration that the claimed system was patent ineligible.

The US Patent Office issues a memo to Examiners

This decision has led the USPTO to issue a memorandum to Examiners to provide factual support for such findings. Examiners must support their rejections under Alice Step 2 in writing with, 1) A citation to an express statement in the specification, or by an applicant during prosecution. 2) A citation to one or more court decisions. 3) A citation to a publication. Or 4) A statement that the examiner is taking official notice that the examiner is certain, based upon his or her personal knowledge, that the additional element(s) represents well-understood, routine, conventional activity engaged in by those in the relevant art.


Software patents are not dead. However, specific language as to the problem being solved and its solution must now be provided in detail. One or both must be an improvement over what is well-understood, routine, conventional activity, engaged in by those in the relevant art. The key is careful drafting to show that the invention is more than an abstract idea.

Bill Honaker, The IP Guy

About the Author:

Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the forthcoming book, Invisible Assets – How to Maximize the Hidden Value in Your Business. To download a sample chapter, click here.

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