A Case Called Alice: Software Patents and the U.S. Supreme Court

Intellectual property lawyer Linda Thayer discusses the implications for high-tech companies

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Stephen Cass: Hello, I'm Stephen Cass for IEEE Spectrum’s “Techwise Conversations.” In June, the Supreme Court of the United States decided the case of Alice Corporation vs. CLS Bank International. The case centered on patents held by Alice Corporation for computer-based systems that manage financial risk. CLS Bank challenged the validity of the patents, on the basis that they were merely descriptions of abstract ideas, which are ineligible for patent protection under U.S. law.

In a unanimous ruling, the Supreme Court agreed with CLS Bank and struck down the patents. The case was closely watched by many, who were looking to see how the end result would affect software patents broadly. Here to discuss the ruling is Linda Thayer, a lawyer with Boston-based law firm Finnegan, who specializes in high-tech patents, especially those used in the robotics industry. Thayer joins us now by phone.

Stephen Cass: Linda, welcome to “Techwise Conversations.”

Linda Thayer: Thank you. I’m looking forward to it.

Stephen Cass: So in a nutshell, what was Alice Corporation vs. CLS Bank all about?

Linda Thayer: At a high level, the case of Alice deals with what exactly is subject matter that is eligible for a patent. As you mentioned, the claims here were to a computer-implemented process that is used in business, and there’s a lot of discussion, and there were a lot of prior claims as to whether these types of claims are eligible for patentability at all. We saw it in Bilski, where the court addressed the patentability of business method–type claims, and we’re seeing it here again in Alice.

Stephen Cass: One piece of legal terminology we often hear in relation to this case is people talking about 101. What is 101?

Linda Thayer: “101” is the section of the U.S. patent code that deals with patent eligibility. It acts as sort of a first filter, a first gatekeeper. It’s used by the patent office [the U.S. Patent and Trademark Office] to determine if the subject matter of the claims is eligible for patentability at all, before the claims are examined on other matters, such as novelty or obviousness.

Stephen Cass: So what did the Supreme Court ruling have to say about how lower courts have been determining patent eligibility?

Linda Thayer: Well, CLS came to the Supreme Court because there was a split in the federal circuit. The federal circuit is [the appellate] court that is tasked with hearing all [appeals of] patent law cases, and [setting] the stage for the other district courts that [hear patent cases]. And at the federal circuit, the [decision] was split 5 to 5, which did not give the patent bar, [district courts]*, and the public at large, any guidance as to how this type of claim should be treated. The Supreme Court needed to take up this issue to decide that split and give us some guidance.

Stephen Cass: Critics of software patents point out that at heart all software is just an abstract mathematical algorithm, and so they believe software should be ineligible for protection. Do you think the justices understand that software and mathematical algorithms are basically the same thing—and how does that affect their reasoning?

Linda Thayer: Well, I don’t exactly think that the justices think that software is all abstract, and all ineligible for patent. In fact, there’s some points in the decision where they specifically point out that there is some room for computer-implemented inventions to remain patentable. And there is nothing in the opinion that says that all software claims are abstract ideas. What they’re focusing on, though, is: Does the implementation on a computer add something more to the abstract idea? And that’s a little bit of a different test. They’re taking, as a first step they look at the scope of what is patentable. And then they say, “Does the implementation on a computer add some additional functionality, some additional purpose, some additional extra stuff that transforms the idea into something that’s patent eligible?”

Stephen Cass: So in the light of this ruling, can we expect that more existing patents, especially software patents, will have their validity challenged?

Linda Thayer: Well, I do expect that. I do expect that. There is a tendency to group all software-implemented inventions into one bucket, and I don’t want the message to be that all software-implemented inventions are specious, going forward. I think what we need to focus on is, is the invention just a software coding of an idea that was already present, that was already well known? Or is there something inventive in the software itself? Does the way the software operates make the computer function better? Does it store data better? Does it encrypt better? I think these are all types of ideas that remain patentable. And that’s what we should focus on.

Stephen Cass: How do you think this ruling will affect innovation in the software industry? Will it help stem the tide of patent litigation?

Linda Thayer: I think that it immediately makes a number of patents that have already been procured by nonpracticing entities for purposes of litigation more questionable. It immediately has that effect. So those cases that are already on file, those litigations that are already before the courts, I expect that there will be immediately more challenges based on section 101. I think it will also lead to fewer filings of cases on these types of computer-implemented business-method patents. I think in the longer run, it won't have a large effect on the software industry, because I think there are a lot of valid inventions out there that are computer implemented, and those will remain eligible for patenting.

Stephen Cass: How are you advising your robotics clients to plan for future patents?

Linda Thayer: Some patent applications related to computer-implemented inventions are going to need more detail in the application as to how they affect the function of the computer, how they improve the functionality of the computer, and more detail as to how that happens. I think, unfortunately, a lot of applications that are on file with the patent office right now may not have that level of detail, and may have some difficulty getting allowed. To the extent a company has patent applications already on file with the patent office, they should expect additional rejections under 101. In fact, the patent office, just a few days ago, issued guidance to its examiners that in the interim they are rejecting almost all claims on 101. In fact, companies will also find that many of their applications that are cleared for allowance might be pulled back from allowance, pulled back from issuance. That guidance was sent out by the patent office to its examiners earlier this week. The patent office is clearly revisiting all claims that have issued on these 101 grounds, and I expect that they will be issuing fewer of them. I think that the trick to getting claims allowed will be to amend, to focus on the additional functioning of the computer, to the extent that support for those elements is already in the specifications. That may be difficult for some people if that support is not in there.

Stephen Cass: So what can the robotics industry take away from all this?

Linda Thayer: Well, in a nutshell, this case deals more with computer implemented business-method claims than it does with true software inventions, or computer-implemented inventions of the type that we find in the robotics industry. Robotics is often a combination of hardware devices that are operated by software. I think companies that are seeking patents in the robotics industry should focus on system claims that deal with the combination of elements, and to the extent they claim software applications, really focus hard on the combination of the software and the hardware elements, which is the real novelty of a lot of the robotics inventions.

Stephen Cass: Well, Linda, that’s very useful, and thanks so much for talking with us today.

Linda Thayer: Thank you. It’s been great talking about this case.

Stephen Cass: We’ve been speaking with intellectual property lawyer Linda Thayer, about the recent U.S. Supreme Court case of Alice Corporation vs. CLS Bank and its impact on software patents. For IEEE Spectrum’s “Techwise Conversations,” I’m Stephen Cass.

*Editors Note 7/31/2014: This transcript has been revised to clarify the role of the federal circuit court.

This interview was recorded Thursday, 2 July 2014.

Audio engineer: Francesco Ferorelli

Segment producer: Barbara Finkelstein

Illustration: iStockphoto

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