This is an important case because is supports the argument that software is generally patenable subject matter in the US, provided that the monopoly sought is "sufficiently narrow".

Claims of US patents US7,116,710, US7,421,032, US7,916,781, and US8,284,833 in the name of California Institute of Technology were found to be patent eligible subject matter under 35 USC 101 because while the claimed inventions relate to the abstract idea of error correction, the additional claimed limitations are not necessary or obvious for achieving error correction and they ensure that the claims do not preempt the field of error correction.

Broad description of the invention
The patents disclose methods and apparatus that mitigate corrupting noise in a binary signal using redundant bits transmitted with the original bits (“error correction”). In particular, the patents disclose irregular repeat and accumulate (“IRA”) codes. The IRA codes introduces redundancy by repeating different original bits irregularly.  These bits may be randomly permuted and combined to form parity bits transmitted with the original bits. The receiver ensures that the received original information bits were not corrupted during transmission, by modulo 2 adding the original bits and the parity bits, and checking if the result is the required odd or even. The benefit is that not all bits are repeated the same number of time, which balances data accuracy and transfer time.
Characteristic Claim

Section 101 of the Patent Act 35 U.S.C. defines patentable subject matter: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title”. However, laws of nature, physical phenomena, and abstract ideas are not patentable Diamond c. Chakrabarty, 447 U.S. 303, 309 (1980). Her Honour noted that a ‘robust application” of s101 ensures “that patent protection promotes, rather than impedes, scientific progress and technological innovation,” I/P Engine, Inc. v AOL, Inc., 576 F. App’x 982, 996 (Fed. Cir. 2014). 
Her Honour noted the court must evaluate a two-step test created by Mayo Collaborative Servs. v. Prometheus Labs. Inc., 132 S/ Ct/ 1289, 1293-94 (2012) and developed by Alice Corp. Pty Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354-55 (2014). First, the court must ask is the claim “directed to one of those patent-ineligible concepts” – a law of nature, physcial phenomenon, or abstract idea. Second, if the claim is directed to one of those concepts, the court must ask “what else is there in the claims before us?” This second step determines whether there is an inventive concept that ensures that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.
Her Honour noted that these steps so stated are difficult to apply.  Pre-Mayo precedents offer some guidance in applying these steps:
1. At step one, the court ascertains the purpose of the claimed invention.  The court then analyzes whether this purpose is abstract.  If the purpose is abstract, the court moves to the second step. 2A. At step two, the court tries to identify an inventive concept by considering the claim elements both individually and as an ordered combination. 2B. When viewing claim elements individually, the court must remember that recitation of conventional, routine, or well-understood activity will not save an abstract claim, for example Alice held that reciting a generic computer does not save an abstract idea because computers are ubiquitous. But a claim is not conventional just because it appears in prior art. 2C. When viewing claim elements as an ordered combination, the court should not ignore the presence of any element, even if the element, viewed separately, is abstract. If the ordered combination of elements constitutes conventional activity, the claim is not patentable, but courts should remember that a series of conventional elements may together form an unconventional, patentable combination.
Her Honour notes that Supreme Court decisions on s101 confuse more than clarify, and they leave open the question of the patent-eligibility of computer software, citing Gottschalk v. Benson, 409 U.S. 63(1972), Parker v. Flook, 437 U.S. 584 (1978), Diamond v. Diehr, 450 U.S. 175 (1981), Bilski v. Kappos, 561 U.S. 593 (2010), and Mayo. Alice held that only abstract business methods do not become automatically patentable when implemented on a computer, but failed to answer when, if ever, computer patents survive s 101. Her Honour, however, was of the view that software must be patentable subject matter because “courts should not read into the patent laws limitations and conditions which the legislature has not expressed” Bilski. Arguably, by passing the America Invents Act congress has affirmed that software is patentable. The Supreme Court has implicitly endorsed the patentability of software. Alice seems to acknowledge that software may be patentable if it improves the functioning of a computer itself. 
Her Honour endeavoured to clarify the issue of the patentability of software patents in view of the absence of guidance from the Supreme Court and Alice, and in light of other conflicting district and federal circuit decisions, some of which do not, in her Honours opinion, follow Supreme Court precedent.  She proceeded by identifying broad themes in Supreme Court precedents in relation to s 101. In her Honours opinion, these themes are:
1. The concern regarding s101 is preemption, that is allowing a patent on the invention will impede innovation rather than incentivize it.  This concern underlines both steps of the analysis but courts must be wary about overstating this concern because every patent preempts an area of technology. s101 prevents patentees from too broadly claiming a building block of research, including basic tools of mathematics, and formulas describing preexisting natural relationships. But “a novel and useful structure created with the aid of knowlege of scientific truth” may be patentable MacKay Radio & Tel. Co. v. Radio Corp of America, 306 U.S.  86, 94, 59 S. Ct. 427, 83 L. Ed. 506 (1939).
2. Computer software and codes remain patentable.  The Supreme Court approved a patent on computer technology in Diehr and suggested that software and code remain patentable in Alice, as does The America Invents Act. Alice only held that an ineligible abstract idea does not become patentable simply because the claims recites a generic computer.  Courts must not extend the read of Alice too far, lest they read s101 limitations that do not exist, Bilski.
3. The Supreme Court has been more sceptical of bare attempts to patent mathematical formulas, as opposed to algorithms generally, as can be seen by comparing Benson, 409 U.S. at 65, 93 S.Ct 253 and Flook, 437 US at 585 m.1, 98 S.Ct. 2522. with Diehr, 450 186 n. 9, 101 S. Ct 1048. Benson and Flook were patents for precedure for solving a given type of mathematical problem, whereas in Diehr, an algorithm for curing rubber was found to be patentable. Mathematical formulas that describe preexisting relationships or symbolize longstanding ideas create significant s101 concerns, but not all computerized procedures evoke the same concerns.  The court should not ignore mathematical formulas in its s 101 analysis, because a formula combined with other elements may transform an abstract idea into patentable subject matter.
4. A claim is more likley to be abstract if it stands for a fundamental practice with a long history, like the method in Bilski for hedging risk.  However, s101 does not preclude a claim directed to a longstanding practice that adds something more.  The Supreme Court left open the possibility that innovation elements, rather than “token postsolution components,” could make such a claim patent eligible Bilski.
In light of these factors, her Honour proceeded to apply the first step of the two-step Alice framework. The characterisation of the claim as being abstract or not is essential, and requires the court to identify the purpose the claimed invention is trying to achieve, and ask if that purpose is abstract. Courts should recite a claim’s purpose at a reasonable high level of generality. The object of step one is to identify the risk of preemption and ineligibility.  If a claim’s purpose is abstract, the court looks with more care at specific claim elements at step two.
Age-old ideas are likely abstract, in addition to basic tools of research and development, like natural laws and fundamental mathematical relationships Mayo, Bilski, Benson.
If step one is satisfied, then the court must determine whether there is an inventive concept that appropriately limits the claim such that it does not preempt a significant amount of inventive activity. The court must be wary of making patentability “a draftsman art” Mayo. Patents that claim too broadly or prohibit a vast amount of future inventive activity are suspect Benson, O’Reilly v Morse, 56 U.S. 62 113, 15 HOW. 62, 14, L.ED 601 (1853). Thus, the second step should provide “additional features that provide practical assurance that the process is more than a drafting effort designed to monopolise the ineligible concept itself” Mayo. A claim cannot avoid this preemption concern by limiting itself to a particular technological environment Alice.
With this in mind, the court must disregards “well-understood, routine, conventional activity” at step two Mayo.  A conventional element may be one that is ubiquitous in the field, insignificant or obvious Mayo.  A conventional element may also be a necessary step, which a person or device must perform in order to implement the abstract idea. Conventional elements do not constitute everything in the prior art, although conventional elements and prior art may overlap.
The court must also consider claim elements as a combination. A combination of conventional elements may be unconventional Diehr.
Her Honour found that all the claims of the Caltech claims at issue are directed to an abstract idea.  The purpose of the claimed inventions are to encode and decode data to achieve error correction. The claims explicitly recite the fundamental and long standing concepts of encoding and decoding data. A patent on these essential concepts, without something more, would threaten to preempt the entrie field of error correction. As such, the purpose of these claims – encoding and decoding data for error correction – is abstract.  These ideas, stated at this level of generality, existed long before the patents and were well known in the field. Also noted is the prevalence of error correction techniques. While the claims are to specific methods, step one only looks to the general purpose of the claims.
Despite being generally directed to abstract concepts, the asserted claims contain meaningful limitations that represent sufficiently inventive concepts, such as the irregular repetition of bits and the use of linear transform operations, although many are mathematical algorithms. These algorithms are narrowly defined, and they are tied to a specific error correction process. These limitations are not necessary or obvious tools for achieving error correction, and they ensure that the claims do not preempt the field of error correction. The continuing eligibility of this patent will not preclude the use of other effective error correction techniques.  Therefor, all of the asserted claims are patentable.
The court found that it was unhelpful to argue that that computer inventions involve “mental steps that can be performed by a person with pencil and paper,” and are therefore unpatentable. Pencil and paper can rarely produce the actual effect of the invention. A human could spend months or years writing on paper the 1s and 0s comprising a computer program and applying the same algorithms as a program.  At the end of the effort, he would be left with a lot of paper that obviously would not produce the same result as the software. Hughs’ proposed analysis ignors the fact that the ‘021 patent creates an algorithmic solution for a computing problem – the corruption of data during transmission.
Her Honour considered that s101 must strike a precise balance in the context of software patents.  On the one hand, patent law should not protect inventions that simply apply longstanding ideas to a computer environment.  On the other hand, patents should encourage inventors to create new computing solutions to today’s computing problems.