National Association of Patent Practitioners 18th Annual Meeting & Conference Alexandria, Virginia July 21, 2014 Alice Corp. v. CLS Bank USPTO Preliminary Examination Instructions 2014 Michael Cygan, Senior Legal Advisor Office of Patent Legal Administration United States Patent and Trademark Office

Alice Corp. v. CLS Bank Unanimous Supreme Court Decision No. 13-298 (June 19, 2014) Alice Corp. is the assignee of four patents at issue: The invention is directed to a scheme for mitigating “settlement risk,” i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation, in which a computer system is used as a third-party intermediary between the parties to the exchange.

Alice Corp. v. CLS Bank The patent claims are styled as: a method for exchanging financial obligations, a computer system configured to carry out the method, and a computer-readable storage medium containing program code for causing a computer to perform the method.

Alice Corp. v. CLS Bank The parties agreed that claim 33 is representative: 33. 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 ones 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.

Alice Corp. v. CLS Bank The Supreme Court found: The method claims are ineligible because “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.” The computer system claims and computer-readable storage media claims are ineligible for substantially the same reasons, e.g., that the generically-recited computers in the claims add nothing of substance to the underlying abstract idea.

Alice Corp. v. CLS Bank The decision in Alice Corp. does not: create a per se excluded category of subject matter, such as software or business methods, or impose any special requirements for eligibility of software or business methods.

Preliminary Examination Instructions for Analyzing Claims with Abstract Ideas The USPTO issued Preliminary Examination Instructions on June 25, 2014. Further guidance will be developed based on: The decision considered in the context of existing precedent Public feedback

Preliminary Examination Instructions for Analyzing Claims with Abstract Ideas In Alice Corp., the Supreme Court applied the framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. __ (2012) (Mayo). This framework is applicable to all claims directed to laws of nature, natural phenomena, and abstract ideas for subject matter eligibility under 35 U.S.C. § 101. The Preliminary Examination Instructions followed this framework in analyzing claims with abstract ideas. This framework is currently being used by the USPTO to examine claims involving laws of nature.

Preliminary Examination Instructions – Changes from Prior Guidance Under Alice Corp., the same analysis is used for: all types of judicial exceptions Prior USPTO guidance applied a different analysis to claims with abstract ideas than to claims with laws of nature all categories of claims Prior USPTO guidance applied a different analysis to product claims involving abstract ideas than to process claims The Instructions supersede MPEP 2106(II)(A),(B).

Analyzing Claims with Abstract Ideas: Basic Inquiries The basic inquiries to determine subject matter eligibility remain the same: Does the claim fall within one of the four statutory categories of invention, i.e., process, machine, manufacture, or composition of matter? If not, the claim must be rejected as being directed to non- statutory subject matter. Is the claim directed to an ineligible abstract idea? Examiners are provided a two part analysis following the framework set forth in Mayo and relied upon in Alice Corp. This analysis determines whether the claim is directed to a patent-eligible application of an abstract idea or to the (ineligible) abstract idea itself.

Two-part Analysis for Abstract Ideas Preliminary Examination Instructions for Analyzing Claims with Abstract Ideas Two-part Analysis for Abstract Ideas Part 1: Determine whether the claim is directed to an abstract idea. Part 2: If so, determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. The claim is analyzed as a whole by considering all claim elements, both individually and in combination.

Preliminary Examination Instructions − Part 1 Part 1: Abstract Ideas At some level, all inventions embody, use, reflect, rest upon or apply abstract ideas and the other exceptions. However, an invention is not rendered ineligible simply because it involves an abstract concept - inventions that apply the abstract idea in a meaningful way are eligible. For Part 1 of the analysis, examiners determine whether the claim is directed to an abstract idea.

Preliminary Examination Instructions − Part 1 Part 1: Abstract Ideas Examples of abstract ideas referenced in Alice Corp. include: Fundamental economic practices; Certain methods of organizing human activities; “[A]n idea of itself”; and, Mathematical relationships/formulas. For claims that include abstract ideas like these, the examiner proceeds to Part 2 to determine whether the abstract idea has been applied in an eligible manner.

Preliminary Examination Instructions − Part 2 Part 2: Significantly More? For Part 2, examiners determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. In other words, are there other limitations in the claim that show a patent-eligible application of the abstract idea, e.g., more than a mere instruction to apply the abstract idea?

Preliminary Examination Instructions − Part 2 Part 2: Significantly More? Limitations referenced in Alice Corp. that may be enough to qualify as “significantly more” when recited in a claim with an abstract idea: Improvements to another technology or technical field Improvements to the functioning of the computer itself Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment

Preliminary Examination Instructions − Part 2 Part 2: Significantly More? Limitations referenced in Alice Corp. that are not enough to qualify as “significantly more” when recited in a claim with an abstract idea: Adding the words “apply it” (or an equivalent) with an abstract idea Mere instructions to implement an abstract idea on a computer Requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry

Preliminary Examination Instructions − Part 2 If the claim does not qualify as “significantly more” than an abstract idea, the claim will be rejected under 35 U.S.C. § 101 as being directed to non-statutory subject matter. After the § 101 analysis is complete, examination then proceeds in accordance with the other requirements of 35 U.S.C. § 101 (utility and double patenting), non-statutory double patenting, and §§112, 102, and 103.

Preliminary Examination Instructions − Further Guidance The public is invited to contribute written comments to be considered in formulating further guidance. Written comments are being accepted through July 31, 2014. See “Request for Comments and Extension of Comment Period on Examination Instruction and Guidance Pertaining to Patent-Eligible Subject Matter,” posted June 25, 2014 at http://www.uspto.gov/patents/announce/rfc_mayo_myriad_alice.pdf Comments may be emailed to: alice_2014@uspto.gov.

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