Supreme Court to Review Patent Eligibility Standard for Computer Claims

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court today said it will review a patent case that resulted in a deeply divided decision by the Federal Circuit U.S. Court of Appeals that included six separate opinions and “additional reflections” on what constitutes patent-eligible subject matter in computer-implemented inventions (Alice Corporation Pty. Ltd. v. CLS Bank International and CLS Services Ltd., No. 13-298, U.S. Sup.; See 12/2/13, Page 31).

Summary Judgment

The dispute began in 2007 when CLS Bank International and CLS Services Ltd. (collectively, CLS), which provide settlement services in the foreign exchange market, filed a complaint in the U.S. District Court for the District of Columbia against Australian company Alice Corporation Pty. Ltd., which owns four U.S. patents relating to a computerized trading platform used for conducting financial transactions.  The patents contain claims that recite methods of exchanging obligations between parties and claims that are drawn to data-processing systems and computer-readable media containing a program code for directing an exchange of obligations.

CLS sought a declaratory judgment that the asserted claims of the Alice patents are invalid, unenforceable and not infringed.  Alice answered and counterclaimed, alleging infringement.  In 2009, CLS moved for summary judgment, arguing in part that Alice’s asserted claims were drawn to ineligible subject matter and therefore invalid under 35 U.S. Code Section 101.  Alice filed a cross-motion for summary judgment.

After the Supreme Court issued its decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010) [an enhanced version of this opinion is available to lexis.com subscribers], the District Court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice’s patents invalid under Section 101.  The District Court found that Alice’s method claims “are directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk.”  The court similarly rejected the patents’ system claims and media claims.

En Banc Decision

Alice appealed to the Federal Circuit, which on July 9, 2012, in a divided panel opinion, reversed the District Court’s ruling, holding that the claims at issue, including claims drawn to methods, computer-readable media and systems, were all patent eligible under Section 101.

The Federal Circuit then granted CLS’s petition for en banc rehearing (CLS Bank International v. Alice Corporation Pty. Ltd., No. 11-1301, Fed. Cir.).  The parties were ordered to address two questions on rehearing:  “What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible ‘abstract idea’ and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?” and “In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?”  Twenty-five amicus curiae briefs were filed on behalf of 47 amici.

On May 10, the Federal Circuit issued a 135-page decision that includes a one-paragraph per curium opinion affirming the District Court.  The decision also contains a concurring opinion of five of the 10 circuit judges participating (with one judge not participating); a concurring-in-part and dissenting-in-part opinion of four circuit judges, with some of them taking part in only certain sections of the opinion; a dissenting-in-part opinion of four circuit judges; a concurring-in-part and dissenting-in-part opinion filed by one circuit judge; a dissenting opinion filed by two circuit judges; and “additional reflections” filed by Chief Judge Randall R. Rader.

Petition

The per curiam opinion states:  “Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101.  An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.”

Alice filed a petition for writ of certiorari with the Supreme Court.  The petition presents the following question:  “Whether claims to computer-implemented inventions — including claims to systems and machines, processes, and items of manufacture — are directed to patent-eligible subject matter within the meaning of 35 U.S. Code § 101 as interpreted by this Court.”

In its response brief, CLS says that the question presented is:  “Whether the en banc Federal Circuit correctly affirmed the district court’s judgment that all of the asserted claims are not patent-eligible under Section 101.”

Counsel

Alice is represented by Carter G. Phillips of Sidley Austin in Washington, D.C., and Constantine L. Trela Jr., Tacy F. Flint and Timothy R. Hargadon of Sidley Austin in Chicago.

CLS is represented by Mark A. Perry, Brian M. Buroker and Alexander N. Harris of Gibson, Dunn & Crutcher in Washington.

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