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Decrypting the “Alice Corp. v. CLS Bank International” software patent case: initial thoughts after a first read

June 19th, 2014 |  Published in Intellectual Property

No software patents


By: Gregory P. Bufithis, Esq.


19 June 2014 – Today the U.S. Supreme Court issued its decision in Alice Corp. v. CLS Bank International, a case about software patents that presented the issue whether certain claims about a computer-implemented, electronic escrow service for facilitating financial transactions concern abstract ideas ineligible for patent protection. It is the first Supreme Court case on the patentability of software since Gottschalk v. Benson in 1972. Patent lawyers were hoping this case would establish a test of patent-eligibility that clarifies under what circumstances one may patent software or can be found to be infringing on a software patent.

Um, not quite. The ruling is bad news for software patents but not the knockout blow that software patent opponents were hoping for. And proponents of software patents will find a lot of language as evidence that most software patents are still valid.

It was a unanimous decision (written by Clarence Thomas) and is (suprisingly) quite short and light on footnotes. And … SURPRISE! … the word “software” dares not speak its name. It does not appear anywhere in the opinion.

But it still needs a re-read so here are just some general comments:

Brief background

Alice Corporation owns four patents on electronic methods and computer programs for financial-trading systems on which trades between two parties who are to exchange payment are settled by a third party in ways that reduce “counterparty” or “settlement” risk, or the risk that one party will perform while the other will not. According to Alice’s account, CLS Bank International and CLS Services Ltd. began to use a similar technology in 2002. Alice notified CLS Bank of its probable infringement of Alice’s patents, and the companies discussed licensing of the patents.

The opinion

1. Computer programmers will see the conceptual confusion immediately. And no surprise because we have seen this in scores of cases since the outset of the software patent debate. The Supreme Court rejects the patent because “each step does no more than require a generic computer to perform generic computer functions.” But many computer programmers would point out that this describes all software. Ask any programmer: software is nothing more than a long list of conventional mathematical operations. If you think a list of conventional operations isn’t patent-eligible, that implies that any “invention” you can implement by loading software on a generic computer isn’t patent-eligible.

2. The wording certainly leaves the door open to a stricter limits on software patents in the future. One problem is that Thomas, in his summary of Gottschalk v. Benson (the court’s first software patent case in 1972) says the invention in that case wasn’t patentable because it could be “carried out in existing computers long in use.” Well, the same point could be made about a wide variety of modern software patents, like Amazon’s “one-click shopping” patent. And as Ernie Smith (my “go to” computer science guy on all-things-like-this) told me the Church–Turing thesis (a major computer science thesis) says that any computer program can, in principle, be implemented on any computer. So where does that leave us?

3. This ain’t the last Supreme Court “patentability of software” case. Sooner or later we will have a computer science wonk on the Court and the Court will get a doozy of a case and deal with THE question: a software patent where there’s a genuine disagreement about whether the patent should be valid. For now, we have language a future Court could use to eliminate software patents but we also have wishy-washy language that can be cited to justify/not justify invalidating software patents.

But … the case is clearly in an established trend: the Court has steadily but incrementally restricted patent rights.

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