When Alice in Wonderland went down the rabbit hole in Lewis Carroll’s beloved book, she was transported to a whimsical fantasyland of illogic and confusion. The story roughly foreshadows the adventures of Alice Corp. v CLS Bank International.
Deep in patentland, we re-visit the patentability of software inventions. Alice Corp. is the owner of the patent at issue. The claims include a method, a system and a computer medium revolving around the financial transaction between two parties in which a third party maintains shadow records in order to mitigate “settlement risk”. The simplified issue is whether the claims are an abstract idea, which is specifically excluded as patentable subject matter.
The litigation first began with CLS challenging the validity of the patent and the district court ruling in favor of CLS. The FCA subsequently reversed that decision and then granted an en banc hearing.
Confusion reigned supreme with the FCA en banc hearing. There was lack of consensus amongst the judges, which served to undermine the minimal guidance provided by the preceding Bilski v Kappos case where the Supreme Court decided that a method of optimizing a fixed billing system was patent ineligible because it was directed to an abstract idea. In Alice Corp., five FCA judges felt no claims were patent eligible. Other judges felt some of the claims were patent eligible, but there was no agreement on which claims these were. In the end, the decision included seven separate opinions. It was clear that the law on software patents is still in flux and that guidance is desperately needed.
Alice Corp. went on to file a petition for writ of certiorari, with oral arguments being heard by the US Supreme Court on March 31. Even though firm guidance would be much appreciated, the nine Justices seemed reluctant to abandon the Bilski test. CLS was able to ride that wave and urge the Court to uphold its own past decision. Alice Corp. worked hard to distance its claims from the nature of the fallen Bilskiclaims and argued to restrict the definition of “abstract”.
While CLS and Alice Corp's adventures in patentland are expected to come to a conclusion at the end of June, no one is certain how exactly the end will come about. Will the patent be upheld? Will the claims fall under the power of Bilski? Will software patents as a whole be ruled patent ineligible?
The Court certainly does not have an easy task at hand. A ruling against software patents could open up the floodgates of invalidity challenges in the courts. And some worry a ruling upholding the claims could undermine the software industry.
As Alice in Wonderland proclaims "It would be so nice if something made sense for a change." Perhaps things will makes sense by June 30.