US Supreme Court to debug software patent eligibility
12 December, 2013
The Supreme Court of US admitted the petition of certiorari filed by
Alice Corporation to review the judgement of the Federal Circuit in CLS Bank
Int’l v. Alice Corp.,717 F.3d 1269 (Fed. Cir. 2013). The petition
prays for clarity and certainty in testing patent-eligibility of
computer-implemented inventions—including claims to systems and machines,
processes, and items of manufacture. The Federal Circuit court gave a fractured
verdict without adequately guiding on what standards are to be adopted.
Earlier judgments which have tried to shed light on how to interpret 35
U.S.C. § 101 include Bilski v. Kappos, Mayo Collaborative
Servs. v. Prometheus and Ass’n for MolecularPathology v. Myriad
Genetics, Inc. While Mayo was about diagnostic tests and Myriad
on patentability of genetic material, Bilski was on using
computer/programme relating to hedging transactions in the commodity markets. Bilski
is seen as similar to the present case.
The computer-related invention
The patents at issue, which have been declared invalid consist of
method, medium and system claims. In order to mitigate the risk of default by
one party while the other settles (at a future date) in a financial
transaction, the claimed ‘invention’ maintains what are called shadow
electronic records and reconciles them with the parties’ accounts permitting
only those transactions for which the parties’ updated shadow records indicate
sufficient resources to satisfy their mutual obligations.
Abstract idea worked using a computer
It has been argued that the invention was nothing new and use of
computers was incidental and served only to speed up the procedure. Using a
third party intermediary to oversee and ensure sufficiency of funds for
settlement is already in vogue in escrow arrangements. Adding a computer to the
process did not in way bring in patent eligibility since it did not add
anything. The process could also be executed without computers.
Eligibility under 35 U.S.C. § 101
The relevant Section 101 covers invention or discovery of ‘any new and
useful process, machine, manufacture, or composition of matter, or any new and
useful improvement thereof’. In the instant case it was decided that the addition
of a computer to an abstract idea did not produce a machine. The dissenting
opinions advance a view that ‘any’ in the definition is expansive and invention
as per Section 100 could be ‘anything that is under the sun that is made by
The outcome of this case will be of great interest and import to
numerous industries, entities with software based patents like
telecommunications, electronics and software.