The Software Debate Lives On - Fordham Intellectual Property, Media & Entertainment Law Journal
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The Software Debate Lives On

The Software Debate Lives On

The Federal Circuit has continued to battle with the issue of software patentability in a series of cases including in its two more recent decisions in Bancorp Services LLC v. Sun Life Assurance Company of Canada, and CLS Bank International v. Alice Corp., both decided in July 2012.  The Federal Circuit has also recently decided to rehear en banc the CLS Bank International case.

These decisions highlight the continuing difficulty panels of the Federal Circuit have in deciding software patentability as panels continue to agree and disagree with each other on various patentability issues some of which have created inconsistencies within the court.

The Bancorp patents at issue in the case related to a “System for Managing a Stable Value Protected Investment Plan.”  The two patents disclosed computerized systems and methods for administering and tracking the value of life insurance policies in separate accounts, and address the accounting problem relating to valuing separate account policy that fluctuate with the market value of the underlying investment assets.

The patents at issue in the CLS Bank case related to a computerized trading platform for exchanging obligations in which a trusted third party settles obligation between a first and second party so as to eliminate “settlement risk.”

Both inventions involved claim limitations that incorporated the use of a computer, but were treated differently in terms of their patent ineligibility.  It is important to initially note that these cases were decided by different panels: CLS Bank was before Judges Linn, Prost and O’Malley (Prost, dissenting) and Bancorp was before Judges Lourie, Prost, and Wallach.

The court in CLS Bank held that the invention was patent eligible because the court was unable to conclude that the computer limitations did not play a significant part in the performance of the invention.  Judge Linn, who authored the decision, found that the claims were directed to a very specific application of the inventive concept.  In contrast, the panel in Bancorp found that the application of the computer was not a significant part of the invention and that the claims construed without that application were merely the use of the abstract idea of managing a stable value protected life insurance policy.  The use of the computer merely instructed the use of well-known calculations to help establish some of the inputs into an equation.

Although both panels agree on the fact that the mere inclusion of a computer limitation does not make a claim patent eligible and that the claim whether it be a process claim, apparatus claim, etc., does not change the subject matter eligibility analysis, the way in which each panel looked at these similar inventions was very different.  The Bancorp panel seemed to try to reconcile the two decisions based on factual differences but it seems clear that the CLS Bank court focused on the nature of the invention whereas the Bancorp panel focused on the language of the claims.

These differences could be attributed to the differing composition of the court in both cases, which leaves open the question of what how the court sitting en banc to rehear CLS Bank will address the claims at issue again.  A particularly interesting note is that Judge Lourie who wrote the opinion in Bancorp and has a background in Chemistry, is also the author of the Myriad decision that upheld the BRCA1 and BRCA2 patents as patent eligible and the Federal Circuit’s Mayo v. Prometheus decision that the Supreme Court overturned this past spring.  Clearly, the notion that certain jurists in the Federal Circuit are pro-patent whilst others lean towards an anti-patent approach in the area of patent eligibility, is not as black and white as one may think.  The lack of guidance from the Supreme Court from both the Prometheus and Bilski decisions continues to be a contentious issue in the Federal Circuit and in the area of §101 patentable subject matter and it remains to be seen how this debate will end, if at all.

Tiffany Mahmood

Tiffany Mahmood is a second year student at Fordham University School of Law and the incoming Editor-in-Chief for Volume 24 of the IPLJ. Originally from London, England, Tiffany studied to become a wig-wearing British Barrister before moving to the United States. She is a Senior Conference Fellow at the Fordham IP Institute, assisting in organizing the annual Fordham Intellectual Property Conference, and plans to pursue a career in Patent law in the U.S.