Is Software Patentable?

We may soon have an answer to that question. By “soon” I mean probably sometime in the next two years. By “answer” I mean we will have the en banc opinion of the Federal Circuit in the case of CLS Bank v. Alice Corp.  Yesterday, the Federal Circuit granted CLS Bank’s petition for rehearing and vacated the panel decision issued by the court in July.  Briefing by the parties and likely by a host of interested third parties will begin immediately but oral arguments will not be scheduled until 2013. Perhaps anticipating the private sector’s broad interest in the issues to be considered, the court waived the usual requirement for third parties to obtain leave of the court before filing an amicus brief and specifically invited the United States Patent and Trademark Office to state its views. In addition to the issues considered by the panel, the full court determined to consider:

a. 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

b. 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?

At the district court level, Alice Corp. asserted four patents that cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.” The district court granted summary judgment of invalidity based on a finding that the patents claimed ineligible subject matter and Alice appealed.

Reversing the lower court, the Federal Circuit panel majority held that a claim must not be deemed to be directed to patent ineligible subject matter under § 101 if, in view of all of the claim recitations, it is not manifestly evident that the claim is directed to an abstract idea. Alternately stated, Judge Linn wrote that “unless the single most reasonable understanding of the claim is that it is directed to nothing more than a fundamental truth or disembodied concept with no limitations in the claim attaching that idea to a specific application,it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. § 101.”

The majority then applied what was quickly dubbed the “nothing-more-than” standard and, after criticizing the district court for looking “past the details of the claims” to characterize them fundamental concept that are patent ineligible, looked closely at the claims themselves. In doing so, the majority concluded that Alice’s patent claims “appear to cover the practical application of a business concept in a specific way” which requires computer implemented steps that “play a significant part in the performance of the invention.” This, in the eyes of the majority, is enough to clear the apparently low bar set by § 101.  Judge Prost wrote a strong dissent arguing that the majority had improperly ignored Supreme Court precedent providing that limiting the use of a claimed formula to a particular technological environment or adding purely conventional or obvious pre-solution activity was insufficient to render an abstract idea patentable. We will have to wait and see if the full Federal Circuit gives Supreme Court precedent more weight.