Software is Still Patentable. Well, Sort of: Software Patents in a Post-Alice World

By: Anu Kinhal

Introduction

The Supreme Court of the United States made an impactful ruling that put a grey cloud squarely over the realm of software patents in Alice Corp. v. CLS Bank.[1] Although the Court affirmed a solid framework for when software (or more generally, an “abstract idea”) is patent eligible subject matter, the Supreme Court did not provide any practical guidance on how to apply the framework. The procedural posture sheds light on how we arrived to such a point of confusion.

The defendant, Alice Corp., was granted a patent on the method of mitigating “settlement risk,” the risk that “only one party to a financial transaction will pay what it owes.”[2] Plaintiff CLS Bank, in a declaratory judgment proceeding, challenged the validity of Alice’s patent.[3] The trouble starts here when both parties filed cross-motions for summary judgment on “whether the asserted claims are eligible for patent protection….”[4] Broadly speaking, patent claims are the boundaries of protection that an issued patent will receive. The District Court in this case held that the claims were ineligible subject matter for patent protection.[5] On appeal, a divided Federal Circuit panel reversed the District Court’s holding, only to be reversed themselves by a plurality when the case was heard en banc.[6] Finally, the Supreme Court affirmed the holding of the en banc Federal Circuit.[7] If this winding path has your head spinning, I suspect that you are not alone.

So, what did the Supreme Court really hold? The Court held that because Alice’s claims were directed to an abstract idea that did not have an “inventive concept,” those claims were invalid.[8] What this means in simple terms is that because Alice was trying to take a well known economic concept (risk mitigation in a financial transaction) and simply implement that concept on a computer, it did not qualify as eligible subject matter for patent protection consistent with the test set forth in Mayo.[9]

Ramifications for Software Patents

What was the Supreme Court trying to say regarding the eligibility of software generally as patentable subject matter in Alice? The language of the opinion does not categorically make software ineligible subject matter for patent protection. Rather, the opinion creates a more stringent, albeit nebulous, test that must be applied in order to ensure that those seeking a software patent actually produce a novel piece of intellectual property that can allow others to build and improve on.[10]

In fact, the stated rationale for invalidating Alice’s software claims was the notion of preemption. The Supreme Court reasoned that every new invention, at its core, incorporates some abstract idea. The mere fact that a claim addresses an abstract idea is not, by itself, enough to hold a claim invalid. If abstract ideas alone were patentable subject matter, then the door is open for people to claim those ideas as their own and prevent others from using that abstract idea to make something useful for society. In this sense, the general public would be preempted from creating useful things.

Interestingly, the end goal of preventing the preemption of abstract ideas can be a tool to determine whether currently issued software patents can withstand any future validity challenges. We can ask the following question: “Does the software claim(s) in question simply implement a general concept on a computer and thereby preempt someone from using the concept in another manner?” If the answer is yes, then the patent likely will not withstand a validity challenge. Granted, the phrase “in another manner” in my own hypothetical test is ambiguous, but the goal with my test was to illustrate rather than create.

Since the Supreme Court decided Alice, numerous District Courts have invalidated claims relating to software after applying the new standard.[11] This trend is likely to continue, as noted by Professor Mark Lemley, who stated that the “majority of software patents being litigated right now…are invalid under Alice.”[12]

The silver lining here is that there is a greater chance that the Supreme Court will revisit the eligibility of software patents with a clearer test that will put to rest any doubts and will actually aid in the drafting of future software patents.

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