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Novelty

Creation of Adam

Novelty is defined in the United States by 35 USC 102 as follows:

“(a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless—
(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or …”

In general, novelty requires that the claimed invention must not have been “described in a printed publication, or in public use, on sale, or otherwise available to the public” before the effective filing date (or priority date) of the invention. Everything that is “described in a printed publication, or in public use, on sale, or otherwise available to the public” forms part of the “prior art”. Whether the claimed invention is novel or not is determined in relation to the “prior art”.

A claim is anticipated only if each and every element (feature) as set forth in the claim is found in the prior art reference. It must be either expressly or inherently described, in a single prior art reference. The identical invention must be set out in complete detail as described in the claim. The elements must be as arranged in the claim. It is not a requirement that the exact same words are used in the prior art reference. (MPEP 2131, 2020)

In patent prosecution, a lack of novelty is also known as anticipation. If a single anticipating reference contains all of the elements or features of a claimed invention, the invention as claimed is said to have “been anticipated by” the reference. (WIPO, 2022) 

Otherwise Available to the Public

Library

"Otherwise available to the public” is a “catch-all” provision that provides for a “catch-all” category of prior art that was not covered previously. The question to be answered is whether the prior art was made available to the public. It does not matter that nobody took notice of it. The prior art may be made available to the public when it is contained in a student thesis in a university library. It may also be contained in a poster display or other information disseminated at a scientific meeting. (MPEP 2152.02(e), 2020)

Grace Period

Grace Period

In the United States, the grace period is applied where an inventor's own work may be considered as prior art. It is when the inventor's own work has been publicly disclosed by the inventor, a joint inventor, or another who obtained the subject matter directly or indirectly from the inventor or joint inventor. The disclosure must not be more than one year before the effective filing date of the claimed invention. 

Therefore, the disclosure is not prior art if the disclosure was made: 

1. One year or less before the effective filing date of the claimed invention; and 

2. By the inventor or a joint inventor, or by another who obtained the subject matter directly or indirectly from the inventor or joint inventor. (MPEP 2153.01, 2020)

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MPEP 2131. (2020, 06 25). 2131 Anticipation. Retrieved 08 16, 2022, from Manual of Patent Examining Procedure: https://www.uspto.gov/web/offices/pac/mpep/s2131.html

MPEP 2152.02(e). (2020, 06 25). Otherwise Available to the Public. Retrieved 08 16, 2022, from Detailed Discussion of AIA 35 U.S.C. 102(a) and (b): https://www.uspto.gov/web/offices/pac/mpep/s2152.html

MPEP 2153.01. (2020, 06 25). Prior Art Exception Under AIA 35 U.S.C. 102(b)(1)(A) To AIA 35 U.S.C. 102(a)(1) (Grace Period Inventor-Originated Disclosure Exception). Retrieved 08 16, 2022, from 2153 Prior Art Exceptions Under 35 U.S.C. 102(b)(1) to AIA 35 U.S.C. 102(a)(1) [R-11.2013]: https://www.uspto.gov/web/offices/pac/mpep/s2153.html

WIPO. (2022). WIPO Patent Drafting Manual (Second ed.). Geneva, chemin des Colombettes, Switzerland: World Intellectual Property Organization. doi:10.34667/tind.44657

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About

We have electronic engineering degrees as well as law degrees. We have done a three-year course on intellectual property. 

We assisted a client in New York to respond to a rejection (office action) of a non-provisional patent by the examiner at the USPTO (the United States Patent and Trademark Office). We had a telephone interview with the examiner. Our amendments were successful, and the patent has subsequently been granted as US9233507B2. This was largely a software/algorithm patent.

We also drafted for the same client another non-provisional patent (3d-printing) which was also filed at the USPTO. This patent has also been granted as US9435998B1.

We drafted patents for a client in Melbourne Australia for a betting system and a cryptocurrency wallet.

We have drafted a patent for a client in California. This included the text and the drawings. we also handled the Office Action in this case. A patent was granted at the USPTO with the number US 10,406,075B2. A patent was also granted at the Canadian Patent Office for the same invention as CA3029662C.

For a client in Washington state, we drafted four design patents, two utility patents and registered one trademark.

For a German company TMRW International S.a r.l. we did 5 prior art searches and subsequently drafted the 5 patents. We are currently drafting patents for a US patent attorney located in Michigan. We have done 4 so far.

Our prices are very reasonable.

Email: ipworkspace248@gmail.com

References

1. Javier Peñalba. Email: javier.penalba@tmrw.com 

2. Matthijs Van Leeuwen. Tel.: Washington State +14254492559. Email:

        matt@dutchdogdesign.com

3. Arthur Allen Mogilefsky. Tel.: California 805 904 6164 Email: mogel@charter.net

Patentable Subject Matter

 

35 USC Section 101

In title 35 of United States Code, (effective as from March 16, 2013) section 101 defines patentable inventions as follows:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, my obtain a patent therefore, subject to the conditions and requirements of this title.”

In the United States there are generally 2 criteria to determine whether the invention qualifies as patentable subject matter.

One of the Categories

First, the claimed invention must be to one of the four statutory categories as mentioned in section 101. Section 101 names the four categories of invention deemed to be the appropriate subject matter of a patent. They are processes, machines, manufactures and compositions of matter, or any new and useful improvement thereof.

Figure 1: Machine

Four Judicial Exceptions

Secondly, the claimed, invention also must qualify as patent-eligible subject matter. There are four judicial exceptions which are not paten-eligible subject matter. They are abstract ideas, laws of nature and natural phenomena and including products of nature.

Abstract ideas, laws of nature, and natural phenomenon "are the basic tools of scientific and technological work". Monopolizing these tools by granting patent rights may impede innovation rather than promote it.

Figure 2: Abstract Idea

Exception to the Four Judicial Exceptions

The claim must not be directed to a judicial exception unless the claim as a whole includes additional limitations amounting to significantly more than the exception.

An invention is not considered to be ineligible for patenting simply because it involves a judicial exception. Therefore, the mere fact that a mathematical equation is required to complete the claimed method and system does not doom the claims to not being patentable subject matter. The integration of an abstract idea, law of nature or natural phenomenon into a practical application may be eligible for patent protection. 

Something More Additional Steps

A distinction must be made between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more. The overall process may be patent eligible because of the way the additional steps of the process integrated the equation into the process as a whole. However simply implementing a mathematical principle on a physical machine, namely a computer, is not a patentable application of that principle. An abstract idea, law of nature, or mathematical formula could not be patented. However, an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.

Alice/Mayo Test

Figure 3: Alice/Mayo Test

The Supreme Court (citing Mayo, 566 U.S. 66, 101 USPQ2d 1961) laid out a framework for determining whether an applicant is seeking to patent a judicial exception itself, or a patent-eligible application of the judicial exception. See Alice Corp., 573 U.S. at 217-18, 110 USPQ2d at 1981. This framework, which is referred to as the Mayo test or the Alice/Mayo test. The first part of the Mayo test is to determine whether the claims are directed to an abstract idea, a law of nature or a natural phenomenon (i.e., a judicial exception). If the claims are directed to a judicial exception, the second part of the Mayo test is to determine whether the claim recites additional elements that amount to significantly more than the judicial exception The Supreme Court has described the second part of the test as the "search for an 'inventive concept'". Alice Corp., 573 U.S. at 217-18, 110 USPQ2d at 1981 (citing Mayo, 566 U.S. at 72-73, 101 USPQ2d at 1966). (USPTO MPEP, 2020)

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USPTO MPEP, U. S. (2020, June 25). 2106 Patent Subject Matter Eligibilty. Retrieved August 8, 2022, from uspto.gov: https://www.uspto.gov/web/offices/pac/mpep/s2106.html

 Figure 2: Image by rawpixel.com

Why Patent?

 What Does a Patent Do?

The question often arises why bother to patent? Well, let's firstly see what a patent is. The 35 US code section 101 states:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Figure 1: Invention

Further the 35 US code section 154 (a) (1) states:

“Contents-

Every patent shall contain a short title of the invention and a grant to the patentee, his heirs or assigns, of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States, and, if the invention is a process, of the right to exclude others from using, offering for sale or selling throughout the United States, or importing into the United States, products made by that process, referring to the specification for the particulars thereof.”

A patent, therefore, is a negative right. It does not give you the right to do something. It gives you the right to prevent others from doing something. It gives you the right:

“… to exclude others from making, using, offering for sale, or selling the invention …. or importing the invention, …”

What Use Does a Patent Have?

Figure 2: Patent Usage

A patent is an asset in your estate whether you're a natural person or a legal entity. You can sell a patent, or you can license a patent and earn an income from it. It, therefore, increases the value of a legal entity like a company. It also creates trust in the technology of the company if a company can show that its technology is justified and protected by a patent. People are therefore more inclined to invest in a company that has protected intellectual property like patents. If you are a natural person a patent is a good indication that you have some creative ability. Therefore, a patent increases your value as an employee. It shows some form of accomplishment. A natural person is also more inclined to receive a grant to do research if the field of his research is protected by intellectual property.

Patents Generate Wealth

Figure 3: Wealth

According to TechRepublic (Rayome, 2018) the top 10 most innovative countries, based on the number of patents issued per capita are:

1. Taiwan

2. Israel

3. United States

4. South Korea

5. Japan

6. Switzerland

7. Denmark

8. Sweden

9. Finland

10. Germany

According to WorldAtlas (Mala, 2021) some of the above countries have the following ranking as the richest countries in the world GDP per capita.

5.   Switzerland at $70 276.6

8.   United States at $65,279.5

11.  Denmark at $60,334.8

15.  Germany at $55,891.2

16.  Sweden at $55,027.4

19.  Finland at $51,619.8

30.  Korea, Rep. at $42,728.0

33.  Israel at $41,1947.6

It is of course true that countries' earnings per capita also depend on other things such as natural resources. However, having regard to countries like Japan and Switzerland having no or little natural resources it is clear that innovation and patenting plays a key role in the earnings per capita of a country.

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Mala, A. (2021, November 22). The 15 Richest Countries in the World. Retrieved August 1, 2022, from WorldAtlas: https://www.worldatlas.com/articles/the-richest-countries-in-the-world.html

Rayome, A. D. (2018, September 11). The 10 Most Innovative Countries in the World. Retrieved August 1, 2022, from TechRepublic: https://www.techrepublic.com/article/the-10-most-innovative-countries-in-the-world/

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RECOGNICORP, LLC v. NINTENDO CO., LTD.855 F.3d 1322 (2017)

RECOGNICORP, LLC, Plaintiff -Appellant
v.
NINTENDO CO., LTD., Nintendo of America, Inc., Defendants-Appellees.

United States Court of Appeals, Federal Circuit.

Decided: April 28, 2017.

BACKGROUND

1. The '303 Patent U.S. Patent No. 8,005,303 ("'303 patent") patent is entitled "Method and Apparatus for Encoding/Decoding Image Data.". It teaches a method and apparatus for building a composite facial image using constituent parts.

Prior to the invention disclosed in the '303 patent, composite facial images typically were stored in file formats such as "bitmap," "gif," or "jpeg." But these file formats required significant memory, and compressing the images often resulted in decreased image quality. Digital transmission of these images could be difficult. The '303 patent sought to solve this problem by encoding the image at one end through a variety of image classes that required less memory and bandwidth, and at the other end decoding the images.

Encoding

Decoding

Claim 1 reads: 

“A method for creating a composite image, comprising:

displaying facial feature images on a first area of a first display via a first device associated with the first display, wherein the facial feature images are associated with facial feature element codes;

selecting a facial feature image from the first area of the first display via a user interface associated with the first device, wherein the first device incorporates the selected facial feature image into a composite image on a second area of the first display, wherein the composite image is associated with a composite facial image code having at least a facial feature element code and wherein the composite facial image code is derived by performing at least one multiplication operation on a facial code using one or more code factors as input parameters to the multiplication operation; and

reproducing the composite image on a second display based on the composite facial image code.”

Natural Phenomena

In March 2015, Nintendo filed a motion for judgment on the pleadings, asserting that the claims were ineligible under 35 U.S.C. § 101. Section 101 provides that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor...." There is an exception to that general principle: subject matter directed to laws of nature, natural phenomena, or abstract ideas is not patent-eligible.

Referring to Alice Corp. v. CLS Bank Int'l, ___ U.S. ___, 134 S.Ct. 2347, 2354, 189 L.Ed.2d 296 (2014) the Court states that the Supreme Court has established a two-step test to determine whether patent claims are directed to ineligible subject matter. In the first step, it is determined whether the claims at issue are directed to one of the patent-ineligible concepts. If the answer in step one is yes, it is then asked, what else is there in the claims before us? In other words, step two asks whether the patent claims an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application.

DISCUSSION

A. Alice Step One

The Court stated under the first step of Alice, 573 U.S. 208 (2014) United States Supreme Court when deciding whether the claims are directed at an abstract idea, the inquiry often is whether the claims are directed to a specific means or method for improving technology or whether they are simply directed to an abstract end-result. If the claims are not directed to an abstract idea, the inquiry ends.

Abstract Idea

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The Court concluded that claim 1 is directed to the abstract idea of encoding and decoding image data. It claims a method whereby a user displays images on a first display, assigns image codes to the images through an interface using a mathematical formula, and then reproduces the image based on the codes.

This method reflects standard encoding and decoding, an abstract concept long utilized to transmit information. Organizing, displaying, and manipulating data encoded for human- and machine-readability is directed to an abstract concept. Morse code, ordering food at a fast food restaurant via a numbering system, and Paul Revere's "one if by land, two if by sea" signaling system all exemplify encoding at one end and decoding at the other end. 

Mathematical Formula

RecogniCorp argued that claiming the use of a mathematical formula does not necessarily render a patent ineligible. The Court agreed. In Diamond v. Diehr, 450 U.S. 175, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), the Supreme Court held that despite a method claim's recitation of a mathematical formula, "a physical and chemical process for molding precision synthetic rubber products falls within the § 101 categories of possibly patentable subject matter."

The Supreme Court focused not on the presence of a mathematical formula but on the subject matter of the claims as a whole. The Court concluded that a claim containing a mathematical formula satisfies § 101 when it implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect. Diehr is distinguishable because, outside of the math, claim 1 of the '303 patent is not directed to otherwise eligible subject matter. Adding one abstract idea (math) to another abstract idea (encoding and decoding) does not render the claim non-abstract.

The Court distinguished Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1338 (Fed. Cir. 2016), In that unlike Enfish, claim 1 does not claim a software method that improves the functioning of a computer. It claims a "process that qualifies as an `abstract idea' for which computers are invoked merely as a tool."

The Court stated this case is similar to Digitech Image Technologies, LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014). There, the claims of the challenged patent were directed to the abstract idea of organizing information through mathematical correlations. A process that started with data, added an algorithm, and ended with a new form of data was directed to an abstract idea. In this case, the '303 patent claims a method whereby a user starts with data, codes that data using "at least one multiplication operation," and ends with a new form of data. The Court concluded that there is no material difference between the Alice step one analysis in Digitech and the analysis here. 

B. Alice Step Two 

In step two of the Alice inquiry, the Court stated we search for an inventive concept sufficient to `transform the nature of the claim into a patent-eligible application.' McRO, 837 F.3d at 1312 (quoting Alice, 134 S.Ct. at 2355). To save a patent at step two, an inventive concept must be evident in the claims. See Alice, 134 S.Ct. at 2357 ("[W]e must examine the elements of the claim to determine whether it contains an `inventive concept.'" (emphasis added)); Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1149 (Fed. Cir. 2016) ("The § 101 inquiry must focus on the language of the Asserted Claims themselves.").

RecogniCorp contended that the combination of claim elements, i.e., the "particular encoding process using the specific algorithm disclosed" in the patent "transforms" the abstract idea into a patentable invention. RecogniCorp also points out the "facial feature element codes" and "pictorial entity symbols" disclosed in the '303 patent claims. The Court disagreed. In DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1259 (Fed. Cir. 2014) we found that the patent claims satisfied Alice step two because "the claimed solution amounts to an inventive concept for resolving [a] particular Internet-centric problem." 773 F.3d 1245, 1259 (Fed. Cir. 2014). Claim 1 of the '303 patent contains no similar inventive concept. Nothing "transforms" the abstract idea of encoding and decoding into patent-eligible subject matter. Alice, 134 S.Ct. at 2357. Nor does the presence of a mathematical formula dictate otherwise. As we explained above, claim 1 is directed to the abstract idea of encoding and decoding. The addition of a mathematical equation that simply changes the data into other forms of data cannot save it.

RecogniCorp has not alleged a particularized application of encoding and decoding image data. Indeed, claim 1 does not even require a computer; the invention can be practiced verbally or with a telephone. J.A. 28 (col. 4 ll. 59-63); J.A. 32 (col. 11 ll. 53-59). Independent claim 36 claims the use of a computer, but it does exactly what we have warned it may not: tell a user to take an abstract idea and apply it with a computer. Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306, 1332 (Fed. Cir. 2015).

In sum, the claims of the '303 patent lack an inventive concept that transforms the claimed subject matter from an abstract idea into a patent-eligible application. Alice, 134 S.Ct. at 2357.

CONCLUSION

The claims of the '303 patent are directed to encoding and decoding image data, an abstract idea. The claims provide no inventive concept to render them eligible under § 101. 

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Alice Corp. v. CLS Bank International. 573 U. S. 208 (2014)

1. The Alice Corp Patents

The Alice Corporation is the owner of several patents that disclose schemes to manage certain forms of financial risk. According to the specification largely shared by the patents, the invention relates to methods and apparatus, including electrical computers and data processing systems applied to financial matters and risk management. Alice Corp. v. CLS Bank International, 573 U.S. ____ , 2 (2014)

The claims at issue relate to a computerized scheme for mitigating settlement risk. That is the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. In particular, the claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediary. The parties agree that claim 33 of the ’479 patent is representative of the method claims.

^{2. Claim 33}

Claim 33 recites:

“A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:
(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, 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, each said adjustment taking place in chronological order, and
(d) at the end-of-day, the supervisory institution instructing one of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.”

The intermediary creates “shadow” credit and debit records (account ledgers) that mirror the balances in the parties’ real-world accounts at exchange institutions (banks). The intermediary updates the shadow records in real time as transactions are entered. The intermediary only permits those transactions for which the parties’ updated shadow records indicate sufficient resources to satisfy their mutual obligations. Alice Corp. v. CLS Bank International, 573 U.S. ____ , 3 (2014) 

The intermediary instructs the relevant financial institutions to carry out the “permitted” transactions in accordance with the updated shadow records. In this way the risk that only one party will perform the agreed-upon exchange is mitigated.

In summary, the patent claim:

(1) the foregoing method for exchanging obligations (the method claims),

(2) a computer system configured to carry out the method for exchanging obligations (the system claims), and

(3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims).

All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well. Alice Corp. v. CLS Bank International, 573 U.S. ____ , 3 (2014).

3. Subject Matter Eligible for Patent Protection

The Honorable Judge Thomas starts by reciting Section 101 of the Patent Act. It defines the subject matter eligible for patent protection. It states:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U. S. C. §101. 

4. Exception To Section 101 of the Patents Act

The Supreme Court have long held that this provision contains an important implicit exception. The laws of nature, natural phenomena, and abstract ideas are not patentable. The concern that drives this exclusionary principle is one of pre-emption. Granting the patent would pre-empt use of this approach in all fields. This would effectively grant a monopoly over an abstract idea. The laws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work. Monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote innovation. That would be contrary to the United States Constitution. U. S. Const., Art. I, §8, cl. 8 states that Congress shall have the power to promote the progress of science and useful arts. Patent law may not inhibit further discovery by improperly tying up the future use of the building blocks of human ingenuity. Alice Corp. v. CLS Bank International, 573 U.S. ____, 6 (2014).

5. All Inventions Embody, Use, Reflect, Rest Upon, or Apply Laws of Nature, Natural Phenomena, or Abstract Ideas

At some level, all inventions embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas. 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. In applying the §101 exception, we must distinguish between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more. If the building blocks is integrated into something more they transform them into a patent-eligible invention. Patenting the building blocks of human ingenuity would risk disproportionately tying up the use of the underlying ideas. They are therefore ineligible for patent protection. Integrating the building blocks into something more pose no comparable risk of pre-emption. They remain eligible for the monopoly granted under the patent laws. Alice Corp. v. CLS Bank International, 573 U.S. ____, 6 (2014).

6. Distinguishing Patents That Claim Laws of Nature, Natural Phenomena, and Abstract Ideas From Those That Claim Patent-Eligible Applications of Those Concepts.

The Honorable Judge Thomas refers to Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012), were the Supreme Court set forth a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. This should be done using a two step approach.
First, step 1, is to determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, then we move on secondly to step 2. In step 2 it is asked:
“What else is there in the claims before us?”
To answer that question, consider the elements of each claim both individually and as an ordered combination. It is considered to determine whether the additional elements transform the nature of the claim into a patent-eligible application. This step 2 of the analysis is described as a search for an inventive concept. It is an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept. Alice Corp. v. CLS Bank International, 573 U.S. ____, 7 (2014).

7. Step 1: The Alice Corp Patents Are Directed To A Patent-Ineligible Concept

The Honorable Judge Thomas states that first it must be determined whether the claims at issue are directed to a patent-ineligible concept. He concludes that they are. These claims are directed to the abstract idea of intermediated settlement.

8. Bilski v. Kappos, 561 U. S. 593 (2010).

The Honorable Judge Thomas refers to Bilski v. Kappos, 561 U. S. 593 (2010). The claims in Bilski described a method for hedging against the financial risk of price fluctuations. Claim 1 recited a series of steps for hedging risk, including:

(1) initiating a series of financial transactions between providers and consumers of a commodity;

(2) identifying market participants that have a counter risk for the same commodity; and

(3) initiating a series of transactions between those market participants and the commodity provider to balance the risk position of the first series of consumer transactions.

Claim 4 put the concept articulated in claim 1 into a simple mathematical formula. The remaining claims were drawn to examples of hedging in commodities and energy markets.

The Honorable Judge Thomas states that all members in Bilski agreed that the patent in Bilski claimed an abstract idea. This is because, the claims described the basic concept of hedging, or protecting against risk. It was found that hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class. Alice Corp. v. CLS Bank International, 573 U.S. ____, 8 (2014).

9. Applying Bilski To The Alice Patent

As mentioned the Honorable Judge Thomas concluded that the claims of Alice Corp. describes the concept of intermediated settlement. Use is made 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. The use of a third-party intermediary (or clearinghouse) is also a building block of the modern economy. Thus, intermediated settlement, like hedging, is an abstract idea and beyond the scope of §101. Alice Corp. v. CLS Bank International, 573 U.S. ____, 9 (2014).

10. Applying Step 2

The Honorable Judge Thomas stated that because the claims at issue are directed to the abstract idea of intermediated settlement, the second step in Mayo’s framework has to be applied. The Court concluded that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention. Alice Corp. v. CLS Bank International, 573 U.S. ____, 10 (2014).

11. Using Mayo In Step 2

The Honorable Judge Thomas states that at Mayo Collaborative Services v. Prometheus Laboratories, Inc.566 U. S. _____ (2012), 132 S. Ct. 1289 (2012) in step two, we must examine the elements of the claim to determine whether it contains an “inventive concept” sufficient to “transform” the claimed abstract idea into a patent-eligible application. A claim that recites an abstract idea must include additional features to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea. The Mayo case made it clear that transformation into a patent-eligible application requires more than simply stating the abstract idea while adding the words ‘apply it
The Honorable Judge Thomas finds Mayo itself is instructive. The patents at issue in Mayo claimed a method for measuring metabolites in the blood-stream in order to calibrate the appropriate dosage of thiopurine drugs in the treatment of autoimmune diseases. The respondent in that case contended that the claimed method was a patent-eligible application of natural laws that describe the relationship between the concentration of certain metabolites and the likelihood that the drug dosage will be harmful or ineffective. Methods for determining metabolite levels were already well known in the art. The process at issue amounted to nothing significantly more than an instruction to doctors to apply the applicable laws when treating their patients. Simply appending conventional steps, specified at a high level of generality, was not enough to supply an inventive concept. The introduction of a computer into the claims does not alter the analysis at Mayo step two. Alice Corp. v. CLS Bank International, 573 U.S. ____, 11 (2014).

12 Mere Recitation of a Generic Computer Cannot Transform a Patent-Ineligible Abstract Idea Into a Patent-Eligible Invention

The Honorable Judge Thomas concludes these cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea while adding the words “apply it” is not enough for patent eligibility. Nor is limiting the use of an abstract idea to a particular technological environment. 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 implement an abstract idea on a computer, that addition cannot impart patent eligibility. This conclusion accords with the preemption concern that undergirds the §101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of additional feature that provides any practical assurance that the process is more than a drafting effort designed to monopolize the abstract idea itself. Alice Corp. v. CLS Bank International, 573 U.S. ____, 13 (2014).

13. Do the Claims Do More Than Simply Instruct To Implement the Abstract Idea of Intermediated Settlement On a Generic Computer?

The representative method claim, in this case, recites the following steps:
(1) “creating” shadow records for each counterparty to a transaction;
(2) “obtaining” start-of-day balances based on the parties’ real-world accounts at exchange institutions;
(3) “adjusting” the shadow records as transactions are entered, allowing only those transactions for which the parties have sufficient resources; and
(4) ”issuing” irrevocable end-of-day instructions to the exchange institutions to carry out the permitted transactions. It was contended that the claims are patent eligible because these steps require a substantial and meaningful role for the computer. As stipulated, the claimed method requires the use of a computer to create electronic records, track multiple transactions, and issue simultaneous instructions. The computer is itself the intermediary.
The Honorable Judge Thomas asks the question whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. He concludes that they do not. Alice Corp. v. CLS Bank International, 573 U.S. ____, 14 (2014).
The Honorable Judge Thomas states taking the claim elements separately, the function performed by the computer at each step of the process is purely conventional. Using a computer to create and maintain shadow accounts amounts to electronic record keeping. It is one of the most basic functions of a computer. The same is true with respect to the use of a computer to obtain data, adjust account balances, and issue automated instructions. All of these computer functions are well-understood, routine, conventional activities previously known to the industry. In short, each step does no more than require a generic computer to perform generic computer functions. 

The Honorable Judge Thomas continues and considered as an ordered combination, the computer components of the petitioner’s method. He found it added nothing that is not already present when the steps are considered separately. The method claim lacks any express language to define the computer’s participation. The method claims do not purport to improve the functioning of the computer itself. There is no specific or limiting recitation of improved computer technology. The claims do not claim an improvement in any other technology or technical field. The claims at issue amount to nothing significantly more than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Under the precedents that are not enough to transform an abstract idea into a patent-eligible invention. Alice Corp. v. CLS Bank International, 573 U.S. ____, 16 (2014).

14. Claims To a Computer System and a Computerreadable Medium

As to its system claims, it was emphasized on behalf of Alice Corp. that those claims recite “specific hardware” configured to perform “specific computerized functions.” But what was characterized as specific hardware: a “data processing system” with a “communications controller” and “data storage unit,” for example, is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims. As a result, none of the hardware recited by the system claims offers a meaningful limitation beyond generally linking the use of the method to a particular technological environment, that is, implementation via computers. Alice’s system and media claims add nothing of substance to the underlying abstract idea. It is therefore held that they too are patent-ineligible under §101. Alice Corp. v. CLS Bank International, 573 U.S. ____, 17 (2014).

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