April 10, 2014 by Alex Buonassisi
On Monday, March 31st, the United States Supreme Court began hearing oral arguments in the case of Alice Corporation Pty Ltd v CLS Bank International. Many hope that this ruling will help bring clarity to the patentability of software and business processes under US patent law.
Are computer-implemented inventions patentable subject matter?
This case between Alice Corporation Pty Ltd (Alice) and CLS Bank International (CLS) is one of many recent disputes stemming from the ambiguity of the patentability of software and business processes in the United States. (The IPilogue has previously covered a similar issue in Ultramercial v Hulu here.) The patents in question all involve a computerized system for processing financial transactions. A particularly contested area in the dispute is the scope of patentable subject matter, and the various legal tests involving abstract ideas and inventive concepts in patent claims. The question Alice’s petition for a writ of certiori poses is:
Whether 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 as interpreted by this Court.
Title 35 U.S.C. § 101 is a provision of US patent legislation that provides:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
Alice is essentially asking the court if computer implemented inventions are patentable subject matter as processes, machines and items of manufacture under US patent law. Many viewed this appeal to the Supreme Court as inevitable after the decision in the appeal to the Federal Court resulted in 6 separate decisions spanning 125 pages, all applying different legal analyses to the issue of patentability.
Who is interested?
This case has generated an extraordinary amount of interest, including 11 briefs filed at the petition stage where the court decides if it will hear the appeal, and 41 briefs at the merits stage where the court makes a decision. In addition, the US Solicitor General was granted permission to participate in the oral arguments. The amount of interest is indicative both of the ambiguity in the current law, and the extent of the interests at stake.
Software and business process patents in general have garnered much attention recently, particularly in the US which is one of the most lucrative intellectual property markets worldwide. Much of the debate over these kinds of patents stems from the overriding concept in patent law about the difference between implemented inventions and abstract ideas. All patent law systems share the common feature that abstract ideas and scientific principles cannot be patented. Only novel inventions that actually perform a real-world function are patentable. There are numerous areas where this distinction comes up, but it is most notable in software patents.
In many jurisdictions, including the US, pure software algorithms are not patentable subject matter. Written software code is protected by copyright, but this only protects against verbatim reproduction. Copyright does not protect the underlying ideas, or against independent invention. As such, many software companies have looked for ways to patent software, thus expanding their monopoly beyond the literal code.
One way to achieve this is by incorporating the software or business process into a larger invention, which builds upon other patentable subject matter. This has lead to the “do it with a computer” argument, where some criticize patents granted for otherwise ineligible subject matter simply through the addition of an integrated device.
What is on the line?
Much has been written recently about the scope of patent protection, particularly in light of non-practicing entities (NPE), some of which are pure innovation companies, and others who obtain patent rights with the sole intent of enforcing them against infringing parties. These NPEs have been criticized by some industry members and governments [see 16:02-18:39] alike for taxing innovation, and abusing the patent system without adding any benefit. This phenomenon has been particularly pronounced in software patents, which are often criticized for being broad, ambiguous, or obvious.
Conversely, many industries are increasingly deriving competitive advantage and business value from their business processes and software algorithms. As industry increasingly shifts to a knowledge economy, businesses have more incentive to pursue monopolies through intellectual property law for their processes and algorithms.
What is the answer?
As with many areas of intellectual property law, the best decision will balance the needs of all stakeholders involved. The very nature of intellectual property is granting a time-limited, state-enforced monopoly in exchange for innovation and investment. The overriding policy goal is to encourage future developments by balancing the economic incentives of a monopoly with the need to avoid making that monopoly so broad that it stifles innovation. Hopefully the US Supreme Court, assisted by volumes of supporting briefs from a wide spectrum of parties, will be able to strike that balance for software and business process patents.
Alex Buonassisi is an IPilogue Editor and a JD Candidate at the University of British Columbia.