On Monday, March 31, the Supreme Court heard oral arguments in the closely-watched Alice Corp. v. CLS Bank Int'l case. The question presented was "[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 as interpreted by this Court?" Thus, the viability of many so-called software and business method patents are once again potentially up for review.
This case was likely destined for the Supreme Court once the Federal Circuit released its six-opinion en banc decision last May, demonstrating a severe intra-circuit split. Judge Lourie's concurrence read Justice Breyer's 2012 Mayo v. Prometheus opinion in view of former Justice Stevens' 1978 Parker v. Flook decision, the latter a case that some thought had been in part overturned by 1980's Diamond v. Diehr and 2010's Bilski v. Kappos. In Mayo, however, Justice Breyer resurrected the "inventive concept" analysis of Flook, and its propensity to blur the lines between the inquiries of patent-eligible subject matter, anticipation, and obviousness.
Arguing for Alice was Carter Phillips, for CLS Bank was Mark Perry, and for the U.S. government, as amicus, was Donald Verrilli.
As Mr. Phillips began, the Justices honed in on one of Alice's major obstacles -- the similarity between the claims under review and those in Bilski that were found to be invalid just four years ago. Justices Ginsburg and Breyer, in particular, made analogies between Alice's claims for an intermediate settlement system to mental and pencil-and-paper accounting techniques. While Mr. Phillips attempted to draw the conversation closer to the language of the claims, the Justices indicated their concern that Alice was essentially taking a well-known accounting technique and merely implementing it on a computer.
Justice Kennedy seemed troubled over whether a computer was actually required to implement the claimed methods (Alice's method claims do not explicitly require a computer, but the parties stipulated that the methods were computer-implemented in district court proceedings). On the other hand, Justice Scalia wondered why implementing the claimed method on a computer was not enough for Alice to overcome the § 101 bar. He asked whether "the cotton gin not an invention because it just means you're doing through a machine what people used to do by hand?" Justice Scalia also stated, however, that the issue seemed to be the novelty of the program, not whether a computer was used.
Justice Ginsburg brought up the question that has been in many of our minds since Mayo, of whether that case held that novelty overlapped with patent-eligibility. Naturally, Mr. Phillips argued that Diehr limited the extent to which novelty was part of the § 101 analysis. However, none of the parties or Justice Breyer directly addressed this issue again.
Justice Breyer, nonetheless, seemed to acknowledge that the rule he set forth in Mayo had not been as easy to apply as he would have liked. He stated to Mr. Phillips, "you realize I couldn't figure out much in Prometheus to go beyond what I thought was an obvious case, leaving it up to you and your colleagues to figure out how to go further." Later, to Mr. Perry, Justice Breyer characterized Mayo and Bilski as "sketch[ing] an outer shell of the content, hoping that the experts, you and the other lawyers and the . . . circuit court, could fill in a little better than we had done the content of that shell."
Justices Breyer and Sotomayor pushed Mr. Perry to help them fill in this shell. Justice Breyer sought "the right words or [an] example" of how to tie a software or business method to a computer. Justice Sotomayor wondered how Mr. Perry would write Alice's claims to make the invention patent-eligible. Instead of directly answering these questions, Mr. Perry gave the general examples of data compression and data encryption as software technologies that are likely to be patent-eligible because they address "a business problem, a social problem, or a technological problem."
Chief Justice Roberts brought up the issue of claims that are broad enough to be done without a computer, but require calculations of such complexity that it would take a prohibitively long time to perform the invention by hand. In Mr. Perry's view, such claims are not at issue in this case, and if they were, the claims would need to explicitly recite a computer performing the calculations. But Justice Breyer was concerned that such an approach would lead to the computer being added to the claims as a way of saying "apply it" to an otherwise abstract idea.
Justice Kagan also requested that Mr. Perry help the Court formulate a test for "how sufficiently does [a patent] have to describe [how a computer will implement an idea]." Mr. Perry indicated that claiming a desired outcome is insufficient, but then he fell back on Justice Breyer's Mayo procedure as providing a means for separating the § 101 wheat from chaff. In doing so, he advocated against barring all software patents -- instead indicating that some should be valid, some should not, and that the Court has traditionally looked at these matters in a robust and nuanced fashion rather than as a black and white issue.
Justice Ginsburg asked Mr. Perry why the Federal Circuit split so badly on this case if Bilski and Mayo were clear. Mr. Perry indicated that the Mayo test is sufficient, but that the Federal Circuit has failed to apply it properly.
Mr. Verrilli, arguing on behalf of the United States, also took the position that some software patents are eligible, such as those that are "used to improve another technology." He also stated that the Court need not address the patentability of software in general to resolve this case. However, Mr. Verrilli also believed that the abstract idea exception to § 101 was "the only tool left to deal with . . . a significant problem, the proliferation of patents of business methods."
He went on to contend that novelty and non-obviousness analyses would not be able to "deal with the problem effectively." His example to support this notion, however, was more than a little strained, as he claimed that a § 103 analysis would be "totally divorced from the question of technology at that point."
There are two main take-home points from these proceedings. First, none of the parties, including CLS Bank, think that the Justices need decide the ultimate question of whether software is patentable. All parties seem to agree that some software is patentable, some is not, and that the dispute is where to draw the line.
Second, the Court is searching for a test to apply when determining whether claims that incorporate an abstract idea meet the § 101 requirements. At least five Justices asked for guidance in this regard, but none of the parties were able to answer the question without falling back on Mayo or a similar high-level analysis. This goes to demonstrate the complexity of the issue, and may be a signal that the Court decides this case narrowly.