The Supreme Court recently heard oral arguments in Alice Corp. v. CLS Bank, a case in which the outcome may have a dramatic effect on the future and direction of software patents. Justice Breyer compared the Supreme Court’s task to the dilemma in Greek mythology posed by Scylla and Charybdis, mythical sea monsters that represented the choice between two undesirable situations. The Supreme Court faces the dilemma of articulating a standard of patentability for software patents between the extremes of broad patentability for any claim reciting a computer on one side and preclusion of all software-related inventions on the other. The decision in Alice Corp. will affect how the judicially created abstract idea exception to patentability under 35 U.S.C. § 101 will be applied to software patents. In particular, the decision will provide further clarity as to the effect the recitation of computer-related elements in a patent claim has with respect to subject matter that may otherwise be viewed to encompass an abstract idea. 

The technology in Alice Corp. relates generally to methods, systems and computer-readable media for managing settlement risk through a third-party intermediary. The federal circuit, in an en banc decision, was split 5 to 5 with respect to the patentability of the system claims, which recite various computer-related elements utilized to manage the settlement risk, leaving one federal circuit judge to describe the court as irreconcilably fractured. The split resulted in an affirmance of the decision of the district court holding that the system claims were patent ineligible. 

During the recent oral argument before the Supreme Court, the parties presented different views on the role of the computer with respect to the subject invention. The patentee, seeking to have the decision below overturned, argued the invention related to a specific remedy to the long existing problem of eliminating the risk of non-settlement in global, multiparty transactions. The patentee maintained that in view of the scope of the transactions at issue, the claimed system relied on the computer and the software functionally described in the application to make the invention effective. The patentee further pressed for a liberal interpretation of Section 101, which would render Section 101 as a coarse filter in the overall patentability determination, i.e., the presence of a computing device would render the claims patentable as a machine. Under this approach, the general standards for anticipation and obviousness would be utilized by the U.S. Patent and Trademark Office to prevent patent claims encompassing abstract ideas. 

Justice Scalia appeared to offer the strongest support for the patentee’s position, questioning whether reciting a computer alone should be enough to overcome the Section 101 hurdle to patentability. Justice Scalia further indicated that while the Supreme Court precedent dictates that taking an abstract idea and using a computer to implement the abstract idea does not meet the patentability requirements, this is distinguishable from how a computer is used to implement an abstract idea. 

In opposition, the respondents argued the Supreme Court’s precedent required a determination of ineligibility. The respondent argued that the claimed invention was indistinguishable from the abstract idea of hedging risk that the Supreme Court previously declared patent ineligible. While the respondent generally agreed with Justice Scalia’s distinction, the respondent maintained the claims of the patent at issue merely recited a result and did not specify how to obtain the result utilizing a computer. Thus, the respondent maintained the claims amounted to no more than the mere application of an abstract idea on a computer. The respondent argued for a nuanced approach to Section 101 issues, precluding result-based claiming and evaluating whether the claim recites something significantly more than the abstract idea itself. 

Finally, the Solicitor General presented a position that, if adopted, could severely limit business method and software patents. In particular, the Solicitor General argued for a standard that a computer must impose a meaningful limit on the patent claim. In order to satisfy the standard, the claim would need to be directed to an improvement in computing technology or an innovation that uses computing technology to improve other technological functions. Justice Sotamayor inquired as to whether the Supreme Court even needed to reach such a broad standard on software to decide this case, while Justice Kennedy sought clarification with respect to the boundaries such a standard would impose on patentability. 

While it appears the Supreme Court is unlikely to reach a broad pronouncement on the standards for software patentability, such as the approach suggested by the Solicitor General, the Supreme Court seems to be looking for a path between the perceived choices of Scylla and Charybdis. As such, the Supreme Court’s decision could have a major effect on the best practices for pursuing business method and software patents. As of now the outcome remains uncertain, but we will continue to monitor this case and provide advice on how to best deal with the potentially changing landscape of software patentability.