Mary LaFrance on the Patent Eligibility of Computer-Implemented Inventions: CLS Bank International v. Alice Corp.

Mary LaFrance on the Patent Eligibility of Computer-Implemented Inventions: CLS Bank International v. Alice Corp.

 The Supreme Court's previous musings on the patent-eligibility of software under § 101 have failed to provide the guidance needed by lower courts, practitioners, and patent owners. It illustrates the utter confusion. The jurists with the greatest sophistication on matters of patent law -- the judges of the Federal Circuit -- cannot agree on whether § 101 imposes a standard of patentability at all, much less what that standard is.

Excerpt:

Section 101 of the federal patent statute sets forth the kinds of subject matter that are eligible for utility patents:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. § 101. Even if the claimed subject matter is eligible under § 101, it cannot be patented unless it also satisfies the requirements of § 102 (novelty), § 103 (nonobviousness), and § 112 (enabling disclosure). Despite the apparent simplicity of § 101, the federal courts at every level have struggled to determine the scope of eligible subject matter. Alice Corp. v. CLS Bank Int'l illustrates this difficulty (717 F.3d 1269 (Fed. Cir. 2013), cert. granted, 82 USLW 3131 (U.S. Dec. 6, 2013)) [an enhanced version of this opinion is available to lexis.com subscribers].

The Supreme Court's previous musings on the patent-eligibility of software under § 101 have failed to provide the concrete guidance needed by lower courts, practitioners, and patent owners. Alice Corp. v. CLS Bank Int'l presents the Court with another opportunity to address this crucial topic. It also illustrates the utter confusion that is modern § 101 jurisprudence. The jurists with the greatest sophistication on matters of patent law – the judges of the Federal Circuit – cannot agree on whether § 101 imposes a standard of patentability at all, much less what that standard is.

I. Proceedings Below

In 2007, CLS Bank brought a declaratory judgment action against patent holder Alice Corp., alleging that four of the latter's patents were invalid because they claimed nonstatutory subject matter. Alice counterclaimed for infringement.

All four of Alice's patents were directed to a business method implemented through software. Specifically, they involved a computerized trading platform designed to reduce the settlement risk in certain trading transactions (generally involving stocks or foreign currencies) by using a third party (acting essentially as an escrow agent) to verify that both parties to the transaction will be able to perform their agreed-upon trade on the settlement date. Two of the patents ('479 and '510) recited methods which, both parties agreed, required computer implementation; another ('720) recited a data processing system, and the fourth ('375) recited both data processing systems and computer-readable storage media. CLS argued that all of the claims at issue were abstract ideas and therefore ineligible for patenting under § 101.

After the Supreme Court issued its opinion in Bilski v. Kappos, 130 S.Ct. 3218 (2010) [enhanced version], addressing the patent eligibility of computer-implemented business methods, the district court granted CLS's motion for summary judgment, holding that the claims in Alice's patents were directed to nonstatutory subject matter. CLS Bank Int'l v. Alice Corp., 768 F.Supp.2d 221 (D.D.C. 2011) [enhanced version].

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