United States: Supreme Court Hears Argument On Software Patents

On April 1, 2014, the Supreme Court heard arguments in Alice Corp. Pty. Ltd.v. CLS Bank Int'l, which concerns the patent eligibility of computer-implemented inventions. This is the fourth recent Supreme Court case addressing patent eligibility under 35 U.S.C. § 101, following Bilski, Mayo and Myriad–however none of those cases explicitly addressed § 101 as applied to computer-implemented patents. At issue in Alice are claims of patents which are drawn to systems, methods, and computer readable media for eliminating settlement risk for electronically executed transactions. Seven of the nine Justices asked questions during the argument, with several focused on whether the Court should articulate a "bright line" test for patent eligibility, and if so, how such a rule should be articulated.

Counsel for Alice Corp., the patent owner, argued that the specific claims at issue require more than a simple concept or abstract idea, and that they require tangible steps utilizing a specially programmed computer. Counsel for CLS Bank responded that claims involve a basic two-step process that does not really involve a technological innovation and should therefore be found patent ineligible pursuant to Bilski and Mayo. The Court also heard argument by Solicitor General Donald Verilli on behalf of the government, who advocated a test for patent eligibility of computer-implemented claims that would require that the claim to be directed at an improvement in computing technology or an innovation that uses computing technology to improve other technological functions. In rebuttal, counsel for Alice argued that CLS Bank had not articulated any test for patent eligibility and that the government's test would eliminate any patents involving a "business method," a bright-line that the Supreme Court rejected in Bilski.

A number of the Justices' questions targeted the patent-eligibility of Alice's claims. For example, Justice Ginsburg began by asking Alice's counsel how the concept of intermediate settlement is less abstract than the idea of hedging risk that was held patent-ineligible in Bilski. Justice Breyer repeatedly sought Alice's comments on how the claims at issue were less abstract than an advisor to King Tut using an abacus to inform him when to stop giving away his gold. Justice Sotomayor stated that the claims appeared to simply cover the "function of reconciling accounts." Justice Kagan questioned whether the patents provided any detail about how to perform the function of performing settlements on a computer, as opposed to just stating that the function is performed on a computer, and she also questioned whether a founder of the internet could have patented the concept of purchasing products over the internet, instead of by mail. Finally, Justice Kennedy noted that the innovative aspect of Alice's patents appeared to be an "idea," and that it would be simple to program a computer to perform the task. Justice Kennedy also questioned whether the method could be patented without attaching a computer, and Alice's counsel answered that it could not.

On the other hand, Justice Scalia queried whether adding a computer alone was sufficient to make a claim patent eligible, noting that a cotton gin performed a process that was previously done by hand. Justice Scalia also stated that while the Court has stated that an abstract idea does not become patent eligible by merely adding that it is implemented on a computer, he wondered whether an abstract idea performed on a computer might be patent eligible if the patent claim specifically explains how it is performed on a computer. At one point, Justice Roberts asked CLS Bank's counsel whether the process in the patents was a little more complicated than counsel had suggested, although it was unclear (and debated by counsel) whether the portion of the patents that Justice Roberts pointed to even pertained to any claim asserted against CLS Bank, as opposed to a different invention disclosed in the patents. Justice Roberts also asked whether a process that could otherwise be performed with a pencil and paper could still be patent eligible if it was greatly sped up using a computer. CLS Bank's counsel answered by noting that the claims covered a single transaction between two parties.

Justices Alito and Thomas did not ask any questions.

It is impossible to speculate how the Court will rule based on the questions asked during oral argument, of course. Whichever direction the Justices may be leaning, several appeared to question whether the Court should articulate a "bright line" rule for patent eligibility, and if so, how such a rule should be articulated. For example, after stating that Bilski and Mayo only provided an "outer shell," Justice Breyer asked Alice's attorney about the test suggested in the Bloomberg amicus brief, asked CLS Bank's counsel to articulate a test, and also asked the Solicitor General about application of the government's proposed test. Justice Ginsburg also asked Alice's counsel to state the rule. Justice Kagan asked CLS Bank's counsel how to determine how sufficiently a patent must describe how a computer is implementing an idea to make it patentable. Meanwhile, Chief Justice Roberts specifically referred to a non-exhaustive list of six factors identified in the government's brief and suggested it was not particularly helpful.

The attorneys offered varied answers to the questions about a test. The government offered the above-mentioned technological improvement test. Alice's counsel only suggested applying a "liberal interpretation" of Section 101. CLS Bank' counsel suggested that the rule from Mayo is sufficient, which he stated requires a patent claim to recite "something significantly more than the abstract idea itself."

Justice Scalia also questioned whether it was appropriate to consider novelty or non-obviousness as part of a patent eligibility analysis. Justice Ginsburg stated there was overlap, however, at least according to Mayo.

Finally, several members of the Court appeared to recognize the potential impact of its ruling. For example, Justice Breyer expressed concern that a liberal test would allow business competition to be won by companies with the best patent lawyers, while a strict test might exclude real inventions. Justice Kagan asked whether the Court should be concerned that older patents that were written using more general language might now be deemed patent ineligible, even though they could have previously been written in a manner that would have rendered them patent eligible.

In short, a lively session occurred between the Justices and attorneys as they wrestle with deciding whether Alice's patents are patent eligible, or just an abstract idea, and also whether to create a "bright line" test and if so, what that test should be. An opinion is expected by or during this summer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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