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Software patentability in the US – Supreme court to have another go!

16 January 2014

The US Supreme Court recently announced that it will consider the case of Alice Corp. v. CLS Bank International in what is hoped to be a landmark case which would provide a definitive answer to whether or not an abstract idea or business method is patentable in the US.

In 2010 the Supreme Court in Bilski v. Kappos considered the patentability of an “abstract idea”. The Bilski patent was refused on the basis that while the claimed business method was not categorically excluded, the claims did represent an “abstract idea”. The Supreme Court did not, however, provide a test as to when the implementation of an idea is no longer considered “abstract”, preferring to let the lower courts decide.

In the subsequent Alice Corp. v. CLS Bank International case, the US Court of Appeals for the Federal Circuit (CAFC) considered a series of patents relating to a computerised trading platform for conducting financial transactions between two parties via a third party intermediary. The transaction is conducted via the intermediary so as to reduce, or eliminate “settlement” or “counterparty” risk for the two parties. CLS Bank sought a declaratory judgement that the patents were invalid as they related to an abstract idea.

In May 2013, ten CAFC judges ruled on the validity of Alice Corp’s patents and considered whether: 1) a claim directed towards an “abstract idea” would be allowable when the claim specifies that the idea is implemented on a computer; and 2) whether it matters if the claims were directed to a method, system or storage medium and whether such claims should be considered as equivalent. The answers to these questions were seen as key in determining whether an abstract idea, such as a banking method, would be allowable if implemented on hardware.

The ten Federal Circuit judges were unable to reach a consensus and ruled in a seven-three split that the patents were invalid. The differing opinions showed a deep divide between the judges as to how inventions directed towards “abstract ideas” should be considered.

One of the judges, Judge Newman, summarised the decision of the court as “propound[ing] at least three incompatible standards, devoid of consensus… [thereby assuring] any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.” Another judge, US Chief Judge Rader, has since described the ruling as “the greatest failure” of his career and stated that the Federal Circuit had a responsibility “to provide guidance in the right direction and we did not do that”.

With the uncertainty created by the CAFC decision, and the lack of guidance as to the extent “abstract ideas” are considered non-patentable, the Supreme Court has agreed to consider the question “[w]hether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter….”. The judgment of the Supreme Court is expected to have wide reaching consequences for software implemented inventions, not just inventions directed towards more abstract ideas. Given the potential impact the judgment may have on US software patents, it is unsurprising to see a large number of amicus briefs arguing in favour, and against, the eligibility of business method and software patents.

The Supreme Court is expected to rule on the case in June 2014, in a judgment which will hopefully provide guidance as to how the US courts and the US Patent and Trademark Office should consider business method and software patents.

Dr Diego Black
Dr Karl Barnfather
Electronics, Computing & Physics Group