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US Supreme Court to debug software patent eligibility

12 December, 2013

The Supreme Court of US admitted the petition of certiorari filed by Alice Corporation to review the judgement of the Federal Circuit in CLS Bank Int’l v. Alice Corp.,717 F.3d 1269 (Fed. Cir. 2013). The petition prays for clarity and certainty in testing patent-eligibility of computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture. The Federal Circuit court gave a fractured verdict without adequately guiding on what standards are to be adopted.        

Earlier judgments which have tried to shed light on how to interpret 35 U.S.C. § 101 include Bilski v. Kappos, Mayo Collaborative Servs. v. Prometheus and Ass’n for MolecularPathology v. Myriad Genetics, Inc. While Mayo was about diagnostic tests and Myriad on patentability of genetic material, Bilski was on using computer/programme relating to hedging transactions in the commodity markets. Bilski  is seen as similar to the present case.            

The computer-related invention            

The patents at issue, which have been declared invalid consist of method, medium and system claims. In order to mitigate the risk of default by one party while the other settles (at a future date) in a financial transaction, the claimed ‘invention’ maintains what are called shadow electronic records and reconciles them with the parties’ accounts permitting only those transactions for which the parties’ updated shadow records indicate sufficient resources to satisfy their  mutual obligations.          

Abstract idea worked using a computer                

It has been argued that the invention was nothing new and use of computers was incidental and served only to speed up the procedure. Using a third party intermediary to oversee and ensure sufficiency of funds for settlement is already in vogue in escrow arrangements. Adding a computer to the process did not in way bring in patent eligibility since it did not add anything. The process could also be executed without computers.          

Eligibility under 35 U.S.C. § 101              

The relevant Section 101 covers invention or discovery of ‘any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof’. In the instant case it was decided that the addition of a computer to an abstract idea did not produce a machine. The dissenting opinions advance a view that ‘any’ in the definition is expansive and invention as per Section 100 could be ‘anything that is under the sun that is made by man’.
The outcome of this case will be of great interest and import to numerous industries, entities with software based patents like telecommunications, electronics and software.   
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