[A2k] CLS Bank v Alice May Signal Turning Point in Software Patents

Seth Johnson seth.p.johnson at gmail.com
Fri Feb 8 12:32:33 PST 2013


February 08, 2013

Federal hearing today marks turning point in war on software patents

A seemingly unassuming court hearing today could be the beginning of
the end of software patents as we know them

By Simon Phipps | InfoWorld

Federal hearing today marks turning point in war on software patents

A federal court hearing today could help undo the damage caused by
software patents -- to the technology industry in general and open
source software in particular. While experts suggest that the results
of the hearing will take time to emerge, they could set important
precedents that make future software patent litigation, especially by
patent trolls, much harder to win. The ruling may not lead to the
abolition of the patent system as some economists propose, but the
results are still likely to drive change.

Patentable or not?

The case in question involves CLS Bank and Alice Corp., a patent-only
company started by an Australian bank. Back in 2007, CLS could see
trouble coming from some patents Alice was clearly intent on
monetizing, so CLS preemptively sued for a court judgement that
Alice's patents were invalid. Alice sued back for patent infringement,
and it was game on.

[ Simon Phipps tells it like it is: Why software patents are evil. |
Track the latest trends in open source with InfoWorld's Technology:
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By the time the case was heard in district court in 2009, the U.S.
Supreme Court had ruled in the Bilski case, where a claim of patent
infringement on business methods was rejected. That limited judgement
did not finally settle the scope of the patentability of software, but
it did give pause to CLS vs. Alice. Also, requests for summary
judgement by both parties were declined, so the case went to court. In
2010, the district court found in favor of CLS Bank, asserting that
the patents Alice Corporation were attempting to enforce were too

That was good news for most of the software industry, but Alice
Corporation appealed the decision. A majority of judges on a panel at
the federal circuit appeals court agreed and reversed the decision.
All the same, the opinion of the court was clearly very divided, so
CLS asked the court to rehear the case. A poll of the judges in the
federal circuit showed a variety of opinion, so CLS's request was
accepted, leading to a rare hearing of all the judges of the circuit
"en banc."

That hearing is today, Friday, Feb. 8. The court asked both CLS and
Alice to answer key questions for them:

    a. What test should the court adopt to determine whether a
computer-implemented invention is a patent ineligible "abstract idea";
and when, if ever, does the presence of a computer in a claim lend
patent eligibility to an otherwise patent-ineligible idea?

    b. In assessing patent eligibility under 35 U.S.C. § 101 of a
computer-implemented invention, should it matter whether the invention
is claimed as a method, system, or storage medium; and should such
claims at times be considered equivalent for § 101 purposes?

Fixing software patents
These are the critical questions for software patents, and their
answers will establish case law that will affect software litigation
for years to come. The first question is especially significant. The
law does not permit patenting of abstract ideas, so the court is keen
to be told why software does not count as "abstract." The most common
way for software to be anchored to tangible reality is for it to be
associated with "a computer," so the court is also keen to understand
whether that device is itself abstract or whether it can be regarded
as valid.

Since the questions are both complex and important for the computer
industry, a wide range of third parties has offered advice in the form
of friend-of-the-court (amicus) briefings. Some, such as those from
patent giant IBM or from the Business Software Alliance (the voice of
Microsoft and its allies), are thinly veiled attempts to assert that
software patents are crucial to their businesses.

Others are more surprising. For example, British Airways speaks on
behalf of an unlikely assortment of Internet companies -- Harmony,
Intuit, LinkedIn, SAP, Travelocity, Twitter, and Yelp -- that has
lined up against software patents.

Speaking up for open source and the digital society, we find the
Electronic Frontier Foundation (EFF) and Public Knowledge. Their brief
is significant because it offers the approach devised by Stanford's
Professor Mark Lemley as a solution. As I wrote here in September,
Lemley suggests that the patent statute of 1952 has been incorrectly
interpreted concerning software.

Lemley asserts it's incorrect to allow "a computer" in abstract to be
glued on to a software idea as a way to make it concrete. He proposes
instead that only "a specific kind of computer" be allowed to convert
an abstract software idea into a patentable creation. A computer would
need to use a particular class of operating system, for example, or be
programmed in a specific way before the patented software idea was
added. This would also push the patent into a becoming a "functional
claim," a kind of patented idea with well-understood restrictions.

Defending open source
EFF Staff Attorney Daniel Nazer told me, "The Federal Circuit should
apply the well-established law on functional claiming to limit
over-broad software and business method patents. And while we hope it
does so in this case, we can't predict how the court will rule. A
proper application of the law of functional claiming will make it
harder for trolls to assert vague and over-broad patents. It should
also make it harder to get such patents in the first place."

Lemley himself is more circumspect. As he told me via Twitter: "CLS
Bank could be very significant for software patents, though I doubt
there will be agreement on a clear test."

CLS Bank could be very significant for software patents, though I
doubt there will be agreement on a clear test.

He's expecting a fragmented opinion from the en-banc hearing, which
seems likely given both the fragmented panel opinion last summer and
the desire of the court to sit en-banc in the first place.

Attorney Erica Arner of IP litigation specialists Finnegan agrees. She
told me the result of today's hearing could take four months or more
to emerge, and when it does there are likely to be multiple opinions.
Both Lemley and Arner agree that if this happens, there's likely to be
pressure for the Supreme Court to hear the issue, which could take
significantly longer to happen.

Arner believes the various opinions could provide a toolkit of
techniques for evaluating the patentability of software in the future.
She thinks it's unlikely the court will devise a single "bright line"
test for distinguishing patentable ideas.

But others are more hopeful, especially if the court finds Lemley's
ideas compelling. The EFF's Nazer said, "This is definitely a big case
for the open source community and anyone who works in software. Any
decision that limits the scope of vague and over-broad software
patents will help all creators." As Groklaw's Pamela Jones points out,
there's a strong consensus among most of the amici that this could
happen, at least to the extent of ruling out the cargo-cult-like
addition of "a computer which..." to abstract software ideas just to
get them past a patent examiner.

While the winners from the proprietary software world of the 20th
century might hate that idea, the open source community would welcome
any change that diminishes the threat of software patents. Red Hat
vice president and assistant general counsel Robert Tiller told me,
"One of the major problems for open source innovation, as well as
software innovation generally, is a minefield of software patents with
unclear boundaries. An entire business has grown up to exploit this
bug in the patent system. The exploiters thrive in part based on the
previous reluctance of the courts to apply rigorous standards to
invalidate bad patents. The CLS case is an important opportunity for
the Federal Circuit to fix a part of this problem."

This case won't solve all the problems, and whatever conclusion it
reaches may take many months to come into full effect -- years if it
requires Supreme Court confirmation. But the pressure from developers,
innovators, and the citizen consumer-creator-makers of the Internet is
building. Software patents need fixing, and this important hearing
could be the pivot around which a solution turns.

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