SCOTUS on the Software Patent Rabbit Hole - Fordham Intellectual Property, Media & Entertainment Law Journal
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SCOTUS on the Software Patent Rabbit Hole

SCOTUS on the Software Patent Rabbit Hole

Legal protection is afforded to the expanding arena of man-made innovations, including inventions of design, utility, and even creative expression.  Congress once described patentable subject matter to “include anything under the sun that is made by man,” but for many years, software has tinkered with the eligibility requirements for copyright and patent protection and posed questions regarding the integrity of the current standard.  On March 31, 2014, the United States Supreme Court will hear evidence in Alice v. CLS Bank, a case projected to be one of the most influential software patent law decisions of the decade.  The Court will hear arguments on whether computer-implemented inventions can and should be patented.  The software at issue specifically in Alice is used to curtail “settlement risk” in financial transactions where money is held in escrow.  According to a report from CNN, the software particularly serves to “mitigat[e] risk in foreign transactions—essentially ensuring that one party won’t default after the other party has already fully performed his half of the bargain.”  Alice Corp. is a company set up by Ian Shepherd, the man who first filed a series of patent applications for the software.  These patents were granted and assigned to Alice Corp.  Alice Corp. has previously argued that its innovation requires the use of a computer, and therefore its software amounts to a patentable invention.  CLS argues that Alice Corp.’s function should be lumped with that of other disfavored patent trolls, or non-practicing entities that hold patents, but make no products, and bring patent infringement lawsuits against companies that do make products. 

In support of CLS Bank, the Solicitor General approaches the question of computer-based claims alternatively, asking whether the “claims for mitigating financial risk by using a third party intermediary” are patent eligible. The attorneys for CLS Bank International argue, “Alice has never built a computer system capable of settling transactions according to the claimed method, has never written instructions to program any computer to perform the method, and has never practiced any of the asserted claims.”  On the other hand, Alice argues that CLS Bank, after devising a computer-implemented risk mitigation system to the currency exchange market in 2002, failed to acquire a license for its product.  In 2007, CLS sued Alice, seeking a declaratory judgment that Alice’s patents were invalid.  Among the many potential arguments to be explored with patent novelty and usefulness, CLS’s focus remains on the requirement for patentable subject matter.  The Court has recognized that under Section 101 of the relevant statute, laws of nature, physical phenomena, and abstract ideas are strictly NOT patentable subject matter.  Here, CLS argues that Alice has tried to patent an “abstract idea” in a “basic economic concept of intermediated settlement of escrow.”

Ultimately, the outcome in Alice is expected to influence the fluctuating landscape for patent eligibility in the software field internationally.  Hopefully, the decision will stand to provide some clarity as to the patentability threshold for computer-related inventions.  These products blur the lines between non-patentable “rules” of abstraction (such as an algorithm or mathematical formula) and patentable man-made innovation applying such a rule (using the algorithm to intend for a brand new outcome or product).  The intricate area of computer sciences has flourished tremendously since the 1970s benefitting and advancing society as a whole.  Software engineering has, however, caused severe complications for inventors, lawyers, and judges across the world.  With the advent of smartphones, Kiva Robots, and Fitbits, it’s time to revisit the fundamental aspects of both innovative eligibility and legal protection.  I hope that the Honorable Justice Samuel Alito, Jr., (who brilliantly oversaw a Moot Court final round at Fordham this weekend) makes his train for work on Monday!

Puja Dave

Puja Dave is a second year at Fordham Law School and a staff member of the Fordham Intellectual Property, Media, & Entertainment Law Journal. Puja’s interest in IP is primarily in biotechnology and pharmaceutical patents, $600 heels trademarked by a yellow sole, and Tom Ford’s exclusive Amish couture collection. In her spare time, Puja enjoys blending jalapenos into libations, collecting polly pockets, and hanging out at the Columbus Avenue Home Goods. She is currently planning her expedition to Mount Everest in the upcoming summer with her doorman, who is half Sherpa.