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US high court ruling leaves questions on software patent eligibility

By: Associated Press//June 23, 2014//

US high court ruling leaves questions on software patent eligibility

By: Associated Press//June 23, 2014//

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The U.S. Supreme Court held last week that some, but not all, computer-implemented software functions are too abstract to qualify for a patent.

But the court’s ruling in Alice Corp. v. CLS Bank Int’l, No. 13-298, did not clearly define where the line should be drawn, leaving attorneys to fill in the gaps as best as they can while awaiting further guidance from the lower courts and the U.S. Patent and Trademark Office.

The decision “gives us some guidance as to what is not patentable,” said Stephen Weyer, counsel in the Alexandria, Va. office of Stites & Harbison PLLC. “That is helpful. But what we’d like to have is some example of things that are patentable.”

The unanimous ruling makes clear that the two-step test established by the court in its 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories Inc. for determining patent eligibility for biotechnology patents under §101 also applies to computer-implemented method patents.

Under that test, courts must first determine whether the patent claim at issue addresses a patent-ineligible concept such as laws of nature, naturally-occurring phenomena or abstract ideas. If not, there is no §101 problem.

If so, the court then must determine whether the claim’s elements sufficiently transform the nature of the claim into a patent-eligible application.

Having a test is a good first step for intellectual property attorneys and their clients, said Ronald Cahill, a partner in the Boston office of Nutter McClennen & Fish LLP.

“The court has wholeheartedly endorsed [the Mayo] process for determining the patentability of computer-implemented methods,” he said.

But moving forward the devil will be in the details, Cahill said.

“The thing that’s left unanswered is, how do you know if [software] is abstract or not? How do you know if a business method is abstract? How do you know if different technologies, from tools to games … are abstract? The court only tells us that this particular software is abstract,” he said.

A computer isn’t enough

CLS Bank International filed suit in federal court, seeking a declaratory judgment that four Alice Corp. patents were invalid. Those patents involved a method for mitigating settlement risks in certain financial exchanges by using a computer system as a third-party intermediary.

CLS claimed the patents were ineligible under §101 of the Patent Act, the provision that determines eligible patent subject matter, because they involved “abstract ideas.”

Alice Corp. countersued for infringement and both parties sought summary judgment. A U.S. District Court ruled in CLS’s favor, holding that the patents were invalid because they involved general computer implementation of a “basic business financial concept.”

A divided en banc U.S. Court of Appeals for the Federal Circuit, in a short per curiam decision annexed to six separate opinions, affirmed.

The U.S. Supreme Court granted certiorari to decide whether computer software programs are patent-eligible subject matter under §101.

But instead of a broad ruling, the court issued a narrow holding finding that the patents at issue were ineligible because they involved an abstract idea that was simply carried out by a generic computer program.

“[T]he mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention,” wrote Justice Clarence Thomas.

“In other words, simply limiting use of an abstract idea to use on a computer does not make the abstract idea patentable,” said Brett Krueger, a partner in the Bloomfield Hills, Mich., office of Honigman Miller Schwartz and Cohn LLP.

Instead of establishing a new standard, the court directed inventors, lawyers and patent examiners toward the existing Mayo test.

“Alice isn’t a dramatic shift,” said Baldassare Vinti, a partner at Proskauer Rose LLP in New York. “It’s more of a reaffirmation of the Supreme Court holding in Mayo.”

He noted that rather than remanding the case for further consideration, “as the Supreme Court may do in a case where a new standard has been articulated,” the court analyzed the claims before it and simply declared them invalid.

Advice to clients: Be specific

The ruling leaves the door open for software programs to be deemed patent eligible. But just which programs are transformative enough of otherwise abstract ideas to pass muster under §101 remains far from clear.

“The concept of ‘an abstract idea’ has been in flux [for] over 100 years,” said Krueger.

Weyer said the decision does suggest that to pass muster under the Mayo test, computer programmers will have to be very specific about exactly how a program works, and how it transforms what would otherwise be an abstract idea into something new and therefore patent eligible.

The ruling “gives us some guidance in that it makes us go to our clients and say, ‘You are going to have to give a lot of specific and concrete information’” in your patent claims, Weyer said. “You will need a lot of detail so there won’t be any question that this is an application of a principle and not just the principle itself.”

In the meantime, lawyers will be watching the Federal Circuit to see how it applies the Mayo standard to software programs going forward.

Predicting those outcomes will be made even more difficult by the recent retirement of Federal Circuit Judge Randall Rader, who had served as chief judge since 2010 and authored some of the court’s most important patent rulings, sometimes casting the deciding vote.

“What we do know about what claims will pass muster [under §101] comes from Judge Rader,” said Cahill.

One thing is certain: The lower courts won’t have to wait long to take up the issue.

“There are a lot of defendants today,” Cahill said, “who are working on summary judgment motions claiming that software patents are invalid under §101.”


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