Alice Corp. v. CLS Bank International

Alice Corp. v. CLS Bank International is an upcoming Supreme Court case involving the patentability of software programs. Specifically, the Court has posed two questions:

1. 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?
2. 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?

The case has received inconsistent verdicts during appeals. Initially, CLS Bank sought a judgment that Alice's four patents on electronic methods and computer programs for financial-trading systems were invalid. Alice then countersued for infringement of its patents. The district court judge ruled that the patents were abstract and therefore patent-ineligible. Alice appealed and a panel at the Court of Appeals for the Federal Circuit overturned the district court decision. The panel ruled that the patents were valid. CLS petitioned for a rehearing and a new panel at the same court reversed the previous panel's decision. Although seven of the ten judges on the new panel agreed that the patents were invalid, they wrote incompatible opinions. Alice then appealed to the Supreme Court.

The software industry has been observing the case closely. 27 amicus curiae briefs (legal opinion by a third-party to the case) have been filed.

Tim Berners-Lee, inventor of the World Wide Web, argued that the Supreme Court should take the opportunity to abolish software patents. I remember hearing similar sentiments before Bilski v. Kappos (2010), a case involving a business patent on hedging. The Supreme Court, to the disappointment of many, refused to limit or clarify patent eligibility -- "business as usual".

Software patents are a tricky issue. A study from the Government Accountability Office found that a disproportionate share of patent cases concern software patents. James Bessen claimed that this is because software is more likely to have fuzzy boundaries and particularly prone to broad and vague patents. He also claimed that "the patent troll crisis is really a software patent problem".

Software patents as we know them today weren't always legal. In a trio of cases  -- Gottschalk v. Benson (1972), Parker v. Flook (1978), Diamond v. Diehr (1981) -- the Supreme Court held that software algorithms weren't patent-eligible. In 1982, Congress created a new court, the Federal Circuit, to hear patent cases. The Federal Circuit reinterpreted the Supreme Court's decisions, particular Diehr. By 1998, in State Street Bank v. Signature Financial Group, the Federal Circuit had opened the floodgates to software and business method patents.

Until recently -- Bilski v. Kappos (2010) and Mayo v. Prometheus (2012) --- the Supreme Court hasn't interfered with the lower court's new interpretations. By not interfering, the Supreme Court may have implicitly accepted the broadening of patent eligibility and legality of software patents. Bilski and Prometheus could suggest a change in the future.

I would like to limit (if not abolish) software patents, but given the shear number of software patents already granted by the USPTO, and the difficulty of distinguishing a "software" patent from another patent, this would be very difficult. Interest groups both in favor and against software patents would also politicize the issue.