Software patent owners, take heart. In a detailed order signed November 3, 2014 in California Institute of Technology v. Hughes Communications Inc.,1 Judge Mariana Pfaelzer of the U.S. District Court for the Central District of California found that although the claims in the software patents asserted by Caltech were directed to abstract ideas, the claims were nevertheless patent eligible under 35 U.S.C. § 101. In her ruling, Judge Pfaelzer has injected helpful clarity to the question of when, if ever, a software-related claim is patent eligible post Alice.
In the wake of the Supreme Court’s June decision in Alice Corp. v. CLS Bank,2 which set forth a two- part framework for determining patent eligibility under 35 U.S.C. § 101, a rash of district courts have used Alice as the basis for holding that software-related patents were not patent eligible, essentially ending these patent infringement cases, barring an appeal. It has left many wondering whether any type of software-related invention could still be patentable after Alice. At least one district court thinks that the answer is clearly yes.
In October of last year, Caltech sued Hughes Communications, Dish Network and others for infringement of four patents directed to a specific form of error correction code called an irregular repeat and accumulate code. Hughes moved for summary judgment on the grounds that the asserted claims were not patent eligible based on the Alice decision. In a thorough and well-reasoned order, Judge Pfaelzer denied Hughes’ motion, concluding that while the claims in the patents were directed to abstract concepts, they also contained meaningful limitations representing sufficiently inventive concepts “such as the irregular repetition of bits and the use of linear transform operations.”3
This decision is significant not only because it is one of the few cases where a district court has reviewed software-related patent claims in light of Alice and found those claims to be patent eligible, but also for the depth and breadth of the analysis by the patent-savvy court. Noting that the Supreme Court left open the question of when, if ever, computer software is patentable, the court concluded that when “the Supreme Court leaves questions open, lower courts have a duty to offer their views and develop the law.” In Caltech, Judge Pfaelzer assumed this duty with a level of rigor that has not been typical of post-Alice decisions.
The two parts of the Alice framework are (1) determining whether the claims at issue are directed to laws of nature, natural phenomena or abstract ideas; and (2) if so, searching for an inventive concept—that is, an element or combination of elements that is sufficient to ensure that the patent amounts to “significantly more” than a patent on the ineligible concept itself.4 Perhaps because the patent at issue in Alice—which claimed a method of intermediated settlement—was ultimately found to be nothing more than an abstract idea, the contours of what exactly qualifies as an abstract idea and what could be considered “significantly more” were not fleshed out by the Supreme Court.5 This has left district courts, patent examiners and patent lawyers struggling to define the boundaries of software patent eligibility.
The court in Caltech concluded that computer software, at least in some cases, remains eligible for patent protection. First, the court pointed out that the Supreme Court “could have resolved Alice and provided clarity to patent law by declaring all software patents ineligible” but noted that the Supreme Court did not do this, and in fact, implicitly endorsed the patent eligibility of software when it “improves the functioning of the computer itself” or “any other technology.”6 So Asserting that Alice stands for the proposition that all software-related inventions cannot be patented is simply wrong.
The court also noted that Congress has already acknowledged the existence of software patents. The America Invents Act, passed by Congress in 2011, includes a provision deeming tax strategies unpatentable, but excluding “computer program products” from the definition of tax strategies.7 The Caltech court concluded that by explicitly excluding computer programs from that definition, “Congress contemplated that some computer programs were eligible for patent protection” and that courts “should not read § 101 to exclude software patents when Congress has contemplated their existence.” The court further noted that “a bright-line rule against software patentability conflicts with the principle that ‘courts should not read into the patent laws limitations and conditions which the legislature has not expressed.’”8
Despite the opacity of Alice, the Caltech court, after undertaking a comprehensive review—and critique—of both pre- and post-Alice decisions, was able to identify four broad themes on software patentability and patentability in general that underlie both parts of the § 101 inquiry:
- Preemption: The concern underlying § 101 is preemption—the idea that allowing a patent on the invention will impede innovation rather than incentivize it. Although patentees should not be able to broadly claim a fundamental building block of research, “a novel and useful structure created with the aid of knowledge of scientific truth may be patentable.”9
- Computer Software Remains Patentable: The Supreme Court has approved a patent on computer technology and suggested that software and code remain patentable under Alice. The America Invents Act further demonstrates the continuing eligibility of software. Alice did not Alice Corp., 134 S. Ct. at 2355. Alice Corp., 134 S.Ct. at 2357. California Inst. of Tech., 2014 WL 5661290 at *8. 7 California Inst. of Tech., 2014 WL 5661290 at *7. 8 Id. Id. at *12. significantly increase the scrutiny that courts must apply to software patents—it held only that an ineligible abstract idea does not become patentable simply because the claim recites a generic computer.10
- Mathematical Formulas vs. Algorithms: The Supreme Court has been skeptical of bare attempts to patent mathematical formulas as opposed to algorithms generally. But the court noted that while mathematical formulas “that describe preexisting relationships or symbolize longstanding ideas create significant § 101 concerns…not all computerized procedures evoke the same concerns.” The court concluded that it “should not ignore mathematical formulas in its § 101 analysis, because a formula combined with other elements may transform an abstract idea into patentable subject matter.”11
- Fundamental Practices: A claim is more likely to be abstract if it stands for a fundamental practice with a long history, like a method for hedging risk. But the Supreme Court left open the possibility that innovative elements could make such a patent claim eligible.12
With these themes in mind, the court analyzed Caltech’s asserted software claims under the Alice framework. First the court noted that “the purposes of the claimed inventions are to encode and decode data to achieve error correction,” which are abstract ideas that “existed long before the patents and were well known in the field.”13 Because the claims met the first part of the framework, the court moved on to determine whether there was “something more,” and found that there was:
“Despite being generally directed to abstract concepts, the asserted claims contain meaningful limitations that represent sufficiently inventive concepts, such as the irregular repetition of bits and the use of linear transform operations. Although many of these limitations are mathematical algorithms, these algorithms are narrowly defined, and they are tied to a specific error correction process. These limitations are not necessary or obvious tools for achieving error correction, and they ensure that the claims do not preempt the field of error correction. The continuing eligibility of this patent will not preclude the use of other effective error correction techniques. Therefore, all of the asserted claims are patentable.”14
In reaching its conclusion, the Caltech court dismissed the “pencil-and-paper” argument15 made by Hughes as being inappropriate for this area of technology, and also rejected Hughes’ argument that the Supreme Court has endorsed a bright-line rule against patenting mathematical formulas.
The Caltech court’s thoughtful opinion seeks to strike a precise balance between encouraging inventors to create new computing solutions to today’s computing problems on the one hand, and preventing the patenting of inventions that simply apply longstanding ideas to a computer environment on the other. In the court’s view, “it at least must be true that § 101 protects a unique computing solution that addresses a unique computing problem.”16 We can only hope that Judge Pfaelzer’s well-reasoned opinion will inject some some much-needed clarity to the turbid waters left in the wake of Alice.