Supreme Court to Clarify Software Patent Eligibility

The Supreme Court will consider next year whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are eligible to be patented.

In Alice Corporation Pty. Ltd. v. CLS Bank Int’l et al., the U.S. Supreme Court recently granted a petition for a writ of certiorari to consider absent an inventive concept, whether a method of performing a well understood economic activity is not patent-eligible under Section 101 of the U.S. patent statute. Section 101 broadly outlines what kinds of inventions are patentable, “new and useful process, machine, manufacture, or composition of matter.” Section 101 also provides that “[l]aws of nature, natural phenomena, and abstract ideas are not patentable.”

Alice Corporation Pty. Ltd. is an Australian company that owns four U.S. patents related to economic activity of using an intermediary to mitigate settlement risk in financial transactions. In May 2007, CLS Bank International and CLS Services Ltd. sued Alice, claiming that the patents were invalid and unenforceable. The District Court held that all of the asserted claims of the patents were patent-ineligible under Section 101 because they impermissibly attempt to monopolize the core economic idea of intermediated settlement, or escrow. On appeal, a panel of the Federal Circuit reversed the District Court’s decision, finding that the computer implementation steps for that method were sufficient to justify granting a patent. The en banc Federal Circuit granted a rehearing. In two opinions, a majority of the Court agreed that Alice’s systems as well as method and media claims were patent ineligible under Section 101. 

The Supreme Court’s decision could have a serious potential impact on software patent claims. The Court can expect to receive briefs from the parties and other interested persons and entities in early 2014.