If your company owns or relies on software patents or business method patents enabled by software, then an upcoming decision in a software patent case will be of critical interest to you. Nearly 70 years after the first computer programs were written, the patentability of software remains uncertain. Is software patentable? Are software-implemented inventions patentable? These are questions that have not been clearly answered to date, but the Supreme Court of the United States will soon decide a software patent case that could.
On March 31, 2014, the Court will hear oral arguments in the case of Alice Corporation Pty. Ltd. v. CLS Bank International, et al. The question presented to the Court 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. The broad scope of this question gives the Court the opportunity to provide clarity where there has been uncertainty for so long.
Unlike the question of software patentability, the factual background of the Alice case is relatively straightforward. Alice began operations in the financial transaction market in the early 1990's and filed several patent applications relating to financial settlement transactions. CLS was formed in 2002 under the Federal Reserve Act to facilitate the settlement of foreign exchange accounts. In October 2002, Alice notified CLS of its concerns that the bank was likely infringing on Alice's financial settlement patents, and negotiations for a license to those patents commenced.
In contrast to the factual background, the procedural history of the Alice case has been anything but straightforward. Instead, the case's march through the court system has been more like a microcosm of the broader software patent landscape, replete with uncertainty and inconsistencies. After license negotiations broke off, CLS sued Alice alleging its patent's claims were invalid. The federal district court agreed with CLS and found the patent claims invalid. Alice appealed to the Court of Appeals for the Federal Circuit, and a three-Judge panel reversed course and agreed with Alice. CLS then asked for a review by the full ten-judge panel of the Federal Circuit. The full panel reversed the decision of the three-Judge panel and agreed with CLS. To be certain the full panel did not provide the much-needed clarity on the question of software patentability, the ten Judges wrote six separate opinions and Chief Judge Rader also provided "Additional Reflections."1
The Supreme Court now has a chance to put an end to inconsistent rulings on software patents like those in the Alice case, or at least make them the exception rather than the rule. The stakes are high—and Big Tech companies are paying attention. Amicus briefs have been filed by tech giants like IBM, Google, and Dell. The stage is set, the opportunity is at hand, and the fate of software patents is ripe for the picking. All that remains to be seen is whether the Supreme Court will seize the opportunity to put an end to decades of uncertainty and provide us with a clear decision on the fate of software patents.
1 Months after the full panel's inability to reach a consensus on the patentability of software, Chief Judge Randall R. Rader stated that it was "the greatest failure of my judicial career."