In Europe, obtaining patent protection for electronic systems and computer programs in the areas of business and commerce has long been problematic. However, the US has always been a jurisdiction where applicants had far fewer problems in this regard; if the claims were drafted in an appropriate manner, the patent would nearly always be eligible for patent protection under 35 U.S.C §101. However, in a recent decision, in the US Court of Appeals for the Federal Circuit (Alice Corp v CLS Bank International) this has been thrown into doubt.

Background

Alice Corp owns four patents directed to electronic methods and computer programs for financial trading systems. In particular, these systems allow trades between two parties who are to exchange payment using a third party. The systems operate in very specific ways to reduce the risk of one party performing the trade but the other party not performing the trade.

CLS Bank sued Alice Corp asking the US District Court for the District of Columbia to declare the patents invalid and unenforceable. Alice Corp countersued for infringement. The court ruled, by summary judgement, that the Patents were invalid. The court held that a method "directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimise risk" is a basic business or financial concept and that a computer system configured to implement an abstract idea is not valid as it is no more patentable than an abstract method that is electronically implemented.

Appeal

Alice Corp appealed the Decision. A panel of three judges in the Court of Appeals of the Federal Circuit decided 2 to 1 to reverse the decision of the District Court. The panel held that computer implemented inventions like Alice's are eligible for patent protection under §101 unless it is evident that the claims are about an abstract idea. In this instance, the Court of Appeal suggested that limiting the claim to a specific application would make the claim eligible for patent protection.

CLS Bank petitioned the Federal Circuit Court for an en banc re-hearing before all the judges of the Federal Circuit Court. This was granted and vacated the previous decision of the panel to decide the following questions.

  • What test should the court adopt to determine whether a computer implemented invention is a patent ineligible abstract idea?
  • Could the presence of a computer in a claim ever make a patent ineligible subject matter patentable?
  • Should the method, system and media claims be considered equivalent under §101?

By having an en banc re-hearing, it was hoped that legal certainty would be given.

However, instead, huge uncertainty now exists. The panel of ten Judges issued seven different opinions, with no one opinion being supported by a majority. Seven of the judges upheld the original District Court Decision that the method and computer program claims were not valid. However, the seven judges reached their decision for the conflicting and incompatible reasons. Five of the ten judges upheld the District Court Decision that the computer system claims were not patent eligible. The panel did not agree on a standard to determine whether a computer implemented invention is a patent in-eligible, abstract idea. In other words, the decision asked more questions than it answered.

Given the uncertainty created by the en banc decision, Alice Bank petitioned the Supreme Court to decide the question whether claims to computer implemented inventions – including claims to systems and machines, processes and items of manufacture – are directed to patent eligible subject matter within the meaning of §101. Oral arguments were heard by the Supreme Court at the end of March 2014 and a judgment is expected at the end of June 2014.

Comment

Over the past few years some companies have asserted what are considered to be weak computer related patents against their competitors. In some instances, so-called 'patent trolls' have asserted these weak patents against manufacturers that refuse to pay a royalty and thus hold the manufacturer to ransom. It is therefore unsurprising that computer related inventions are now under the spotlight.

However, the Supreme Court must walk a fine line. Whilst there are many patents that are weak and really only automate a known business process in a non-innovative way, there are an equal number of patents that protect true innovation. The fact that innovation is embodied on software should not enhance or detract from the innovation itself; the patent system is there to protect the innovation. This is something that we have battled towards in the European system.

The Supreme Court must provide guidance in this area of patent law. This guidance must directed to not only lower courts but importantly to the United States Patent and Trademark Office (USPTO). The disruption and associated cost with 'patent trolls' asserting weak patents against companies is huge even if the patent is then found to be ineligible for patent protection by the lower courts. These patents should not be granted in the first place.

The case has been heard, the arguments made, we now await the decision of the Supreme Court.