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The Supreme Court heard oral arguments in Alice Corp. v. CLS Bank, No. 13-298, today (March 31, 2014) regarding the question presented of “[w]hether 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 35 U.S.C. § 101.”  Arguments were heard from the petitioners, the respondents, and the United States as amicus curiae.

From the questions and comments of the justices, one might get the impression that at least some members of the Court were not entirely certain that the Alice patent was directed to an abstract idea.  The Court also seemed to be wrangling with how to draw the line between “technological” software inventions and those based on abstract ideas only.  At one point, Justice Breyer noted there were a lot of suggestions in the 42 briefs filed in the case as to “how to go between Scylla and Charybdis,” suggesting that on one side there was the evil of patenting abstract ideas, and on the other, the harm caused to legitimate software inventions by an overly restrictive test for Sec. 101 eligibility.

Naturally, the petitioners argued that the claims were not directed to an abstract idea, but to “a very specific way of dealing with a problem.”  Just as naturally, the respondents argued that the claims were simply directed to “[d]ebit, credit, and pay,” and thus were at a high level of abstraction.  The government took perhaps the most anti-software-patent position, arguing that improving “the functioning of computer technology” (e.g., through improved encryption or compression algorithms) or using a computer to “improve another technology” would be patent-eligible, but that other software claims would fail under Section 101.  Rather than focusing on the arguments made by the attorneys, the summary below is organized to emphasize the questioning of the Justices.

Questioning the Petitioners

Justices Kennedy, Ginsburg, and Breyer questioned the petitioners as to whether “intermediate settlement” is “less abstract than hedging,” since hedging was found to be a non-eligible abstract idea in Bilski.  Justice Breyer described a hypothetical pen-and-paper (or even abacus) implementation of the abstract idea of “solvency.”  After the petitioners observed that the hypothetical was a mere caricature of the claims, Justice Breyer agreed, but described it as a “caricature designed to suggest that there is an abstract idea here.”  In responding to these questions regarding the abstractness of the invention, petitioners argued that the claims solved the problem of the risk of non-settlement using software “that the patent specifically describes by function.”

Justice Sotomayor raised the question of functional claiming, expressing concern that the claim limitations amounted to no more than “reconciling accounts … through a computer.”

Justice Scalia asked why “doing it through a computer” shouldn’t be enough to confer patent-eligibility.  Just as mechanical inventions perform labor-saving tasks that could be performed by hand, so do computer inventions.  Petitioners agreed that computer-implemented inventions shouldn’t be singled out.

Justice Kagan was interested in pulling apart the invention into an “idea” and a “computer.”  Petitioners were wary of such a division, and argued that the invention, to be useful, had to be performed on a computer and thus could not be separated.

Justice Breyer expressed his concern about striking the right Section 101 test as a policy matter.  If the bar for patentability is too low, business success will depend more on patent lawyers than on anything else.  If the bar for patentability is too high, then no computer-implemented inventions will be protectable.  Regarding Mayo, Justice Breyer said he found it to be “an obvious case” of patent-ineligibility, but deliberately left the line vague so that attorneys could weigh in and help “figure out how to go further.”  Petitioners responded that the line shouldn’t be moved to invalidate more patents.  Congress, by passing the AIA, provided for administrative review of more patents, but did not change the substantive law.  Petitioners suggested that the Court should view this as an endorsement of the status quo and interpret claims as written rather than reducing them to a caricature before applying Section 101.

Questioning the Respondents

Justices Breyer, Sotomayor, Ginsburg, and Kennedy asked, in different ways, if any business process claims would be patent-eligible and what the proper line to draw for Section 101 eligibility would be.  Similarly, Justice Kagan asked about the level of detail required in the claims regarding the computer-implemented steps in order to be patent-eligible and about the potential harm to already-issued patents from tightening the standards of Section 101.  Respondents referred the court to the PTO’s rules that held “economic concepts, legal concepts, financial concepts, teaching concepts, dating and interpersonal relationships and generally how business should be conducted as examples of those things that are likely abstract.”  Respondents further noted that Congress, in the AIA, said that business methods “that pertain to data processing in the financial services industry and do not offer technological solutions” “are subject to special scrutiny.”  Regarding the impact on the patent system, Respondents claimed that “this is a very small problem” because out of 22,000 infringement litigations since Bilski only 57 decisions on Section 101 grounds have been issued by the district courts.

Chief Justice Roberts asked about the teachings of the patent, and if the detailed flowcharts it contained took the invention beyond an abstract idea.  Respondents argued that the complex flowcharts were not related to the claims at issue.  Chief Justice Roberts also asked about the patent-eligibility of a computer-implemented process that was theoretically human-implementable but would be impractical without a computer.  Respondents argued that the claims at issue were not impractical without a computer, but did not address the broader question.

Questioning the Government

Justice Ginsburg, Breyer, and Kennedy asked if the government’s proposed rule would invalidate all business-method and software patents.  The government responded that it would be difficult to identify a patent-eligible business method unless an improved technology, such as an improved encryption algorithm, was involved.

Justice Sotomayor asked if the case before the Court is even a software patent case, since the claims at issue are directed to systems.  The government argued that the claims could be found invalid as system claims because they are directed to abstract ideas without additional technical innovation.

Chief Justice Roberts asked if the government’s proposed non-exhaustive 6 factor test was going to provide greater clarity and certainty.  The government responded that it really boils down to whether the claimed innovation improves a computer’s functioning or improves the functioning of another technological process.  If neither of those is true, the innovation is not patent eligible.

Conclusion

Justices Breyer, Kennedy, Ginsburg, and Sotomayor in particular seemed concerned that the precedents they had set so far had not led to clarity for the Court of Appeals for the Federal Circuit regarding the application of Section 101 to software claims.  Many questions were directed to trying to find proposed language to use to provide better guidance.  However, the suggested guidance did not seem to be what they were looking for.  Petitioners argued for a very narrow reading of the abstract idea exception.  Respondents and the government argued for a very broad one.  Since the Court appears to be sensitive to the set expectations of patentees and yet unwilling to give up on the abstract idea exception, it will have to craft its own answer, with very little help from any of the parties who argued before it today.

Transcript of S.Ct. Hearing in CLS Bank

My thanks to Domenico Ippolito of Schwegman, Lundberg & Woessner, P.A., for this post.

Forty-one companies, four individuals, and a pro-patent organization joined in an amicus brief filed in Alice Corp. v. CLS Bank Int’l (Case No. 13-298) arguing that the “abstract ideas” exception to patent eligibility must be construed narrowly.  As the first-named amicus is Trading Technologies International, Inc., the brief will be referred to herein as the “TT brief.”  TT_Alice_CLS_amici

Beginning from first principles, the TT brief notes that the Constitution provides for patent protection to “promote the Progress of Science and useful Arts” and that Congress has accordingly provided for a broad scope of patentable subject matter.  As a result, the limitations placed on patentable subject matter are largely Court-created rather than being drawn from a literal interpretation of either statute or the Constitution.  The TT brief makes this point in quite strong terms, arguing that “[t]he judicial exceptions to Congress’s expansive definition of patent-eligible subject matter thus lie at the farthest edge of the judicial power, perilously close to the border separating permissible interpretations of statutes from impermissible encroachments on Congress’s Article I authority.”

The TT brief further notes that the question at bar is not whether the claims are directed to novel, useful, and non-obvious subject matter, but only as to “whether computer-implemented inventions that are not directed to a scientific truth should be deemed ineligible even if such inventions are novel, non-obvious, and otherwise patentable.”[1] Amici argue that the answer must be a resounding “no.”  Thus, the TT brief suggests that no computer-implemented claim should be found patent-ineligible merely for being directed to an abstract idea.  Furthermore, as argued by the TT brief and the Rader-Linn-Moore-O’Malley dissent from the Federal Circuit’s decision below, any invention can be boiled down to an abstract idea.  If the elements used to implement the idea are not found to be themselves inventive, then many claims – not merely software claims – will be found to be patent-ineligible on the basis of this test.

Additionally, the TT brief takes direct issue with the finding in the Federal Circuit’s plurality opinion that “a computer is just a calculator capable of performing mental steps faster than a human could.”  Rather, amici make the argument that computers are no longer merely machines capable of performing rapid calculations (and thus of implementing arbitrarily complex mathematical relationships), but are now “highly configurable machines capable of being turned into new and different machines through how they are programmed.”  On this basis, applying the abstract ideas exception to invalidate a broad swath of software patents would preclude patent protection for an area in which much innovation is still occurring: the creation of new specialized machines through the development of improved software.

Like the Moore-Rader-Linn-O’Malley dissent from the Federal Circuit’s opinion, the TT brief focuses on the fact that many issued patents rely on the patent-eligibility of software and the settled expectations of patentees would be disrupted by an expansion of the application of the abstract idea test.  The TT brief takes the argument one step further, by noting that programmable processors are being used in more of the things we buy, and that software is being used to improve those things.  For example, the novelty of a self-parking car is in the software used to maneuver the vehicle, not in the sensors used to gather the information or the control systems used to direct power to the wheels.

The argument continues by suggesting that the “abstract idea” exception to patent-eligibility should be limited to inventions that can be implemented entirely in the human mind, and thus has no bearing on claims that recite hardware components.  Likewise, claims directed toward “scientific truths” that have always existed and thus cannot be invented, are not patent-eligible.  But these two exceptions have no bearing on the patent-eligibility of a software-configured computer that performs specific tasks, so long as those tasks are not mere scientific truths.

Since the TT brief argues that a process performed on a computer cannot be abstract, amici emphasize the fact that both Alice and CLS Bank stipulated that the claims at issue must be performed on a computer.  By contrast, the plurality below minimized this stipulation by making its own finding that “the requirement for computer implementation could scarcely be introduced with less specificity.”  Accordingly, the two positions seem to be based on whether software patents are seen as (legitimate) claims directed to specially-configured machines or as claims to mental processes that happen to be implemented in machines.

My thanks to Domenico Ippolito at Schwegman, Lundberg & Woessner, P.A.’s Silicon Valley office, for this posting.

For those of us that have been wondering how the Supreme Court can get its Section 101 jurisprudence back on track, the answer may be found in the brief of Microsoft Corporation, Adobe Systems Inc., and Hewlett-Packard Company as Amici Curiae, in support of affirmance.  The brief offers a reasonable path forward for the Supreme Court to refine the “abstract idea” test it rolled out in Bilski v. Kappos, 130 S. Ct. 3218 (2010).  That test may have worked to exclude Bilski’s business method innovation from patent eligibility, but unfortunately taken to its logical limit applied equally as well to exclude pretty much every other software invention as well, technological or not.

Clearly, the specter that the abstract idea exclusion to software subject matter will preclude patenting of technologically oriented software innovations in general, and even more so innovations that deal with manipulating what might be regarded as abstract information, such as inventions in the realm of artificial intelligence (e.g. IBM’s Watson(r) artificial intelligence system, or data compression algorithms underpinned by mathematical concepts), is of great concern to many of today’s technological titans, such as Microsoft, IBM, HP, Adobe and many others.

The Microsoft, Adobe and Hewlett-Packard brief echos many of the points made by IBM in its brief (see my post http://www.patents4software.com/2014/02/ibm-weighs-in-on-cls-bank-the-abstract-idea-test-is-unworkable-and-should-be-abandoned/), and also offers a path forward for the Supreme Court to circumscribe the Bilski abstract idea test so its application so it does not pose a threat to “true” technological software invention.  This is the essence of the points made by the brief:

1.  The Court should look at each “claim as a whole” and consider all the limitations of the claim in order to decide eligibility under Section 101.  “Patent eligibility should turn on whether the claim as a whole recites a specific, practical application of the idea rather than merely reciting steps inherent in the idea itself.”

2. Alice Corp is not claiming a “true” technological innovation — notwithstanding the fact that some of its claim are limited to a machine-implementation.  “While some of petitioner’s claims do refer to a computer or computer implementation, none relates to an advance in computing, software, or any other technology. Nor do the claims represent an innovation in how a computer may be employed to produce the desired result. Instead, the claims recite an abstract idea for conducting a business transaction and then add what amounts to the directive, ‘do it on a computer.’”

3.  The subject claims recite no functional relationship between the putative invention, a method for hedging risk, and the computer on which it is implemented.   “The claims all focus on a method for reducing settlement risk in financial transactions. Some claims may mention computers, but there is no connection between the method described and technological innovation; the references to computers are incidental or pretextual. The putative invention is the method, and that cannot be changed by saying, “and do it on a computer.” Far from being directed to patentable computer-implemented inventions, the patents concern unpatentable “abstract ideas” for organizing human obligations.

4. Software is an essential component of today’s technology, and it is just as deserving as patent protection as any other technology.  “Ultimately, however, software underlies the varied functionality and practical utility that computers provide. Without software, computers can do nothing useful. As a result, software is an indispensable aspect of innovation in every technological field and sector of the economy. Different software programs enable a general-purpose computer to perform new and different tasks.  ‘Such programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.’  In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994).”

So, where would the Supreme Court leave us if it adopted this analytical framework in its decision on Alice Corp’s claims?  How can us mere mortals apply these, do I dare say, “abstract” Section 101 concepts to the real world?  I think one analogy that is easier to understand is this.  Consider the hypothetical where the “invention” is claimed as the combination of a record player and a record playing on it, wherein the record constitutes an engraving of a novel musical score on the record.  As I have pointed out in previous posts, I think most patent attorneys would agree that a novel musical composition is outside the scope of patent eligible subject matter, and that merely claiming it as part of a machine (i.e., the record playing on a record player) should not carry the music into the realm of patent eligible subject matter.  I think is pretty much what Microsoft, Adobe and Hewlett-Packard are saying in this brief — that Alice Corp’s business method innovation is the equivalent of music that is not patent eligible, and that merely “playing” this subject matter on a computer doesn’t carry it across the threshold of patent eligible subject matter.

On the other hand, were there some technological aspect to the implementation of the subject matter, like perhaps in the case of the music hypothetical, that the music is capable of performing a technological function like vibrating a beaker of chemicals to mix its content, then there may very well be patent eligibility.

At the end of the day, I think we are headed to a “technical effect” test akin to what the EPO and other jurisdictions have been applying for many years already.