Supreme Court Hears Software Patentability Case, With Narrowly Tailored Ruling Seen Likely

Patent industry observers said Monday they believe the Supreme Court will create a workable, narrowly tailored rule to determine when software is patentable via its upcoming ruling in Alice Corp. v. CLS Bank International. The high court heard oral argument Monday, in which Alice argued its claim to four patents on financial software is valid under Section 101 of the Patent Act. Alice is one of several patent cases the court has heard during its current term -- advocates expect two cases the court heard in February involving health and fitness industry patents are likely to determine when a court can use fee-shifting to award attorney’s fees to the party that wins a case. The court’s rulings in Alice and other cases are likely to help clarify some of the confusion over patent cases, but they remain part of the larger patent revamp landscape, which includes a push from the White House and work in Congress, the Patent and Trademark Office and the FTC, advocates said.

Alice counsel Carter Phillips told the justices a ruling against the Alice-owned patents could potentially render “hundreds of thousands of patents invalid, and the consequences of that, it seems to me, are utterly unknowable.” Phillips cited an amicus brief IBM filed with the court that claimed email, mobile applications and Internet browsing would not have been patentable if the court rules Alice’s patents ineligible. IBM filed the brief in support of neither party (http://bit.ly/1jsGRRh). CLS Bank counsel Mark Perry argued that the case is specifically limited to abstract ideas and “is not the death of software patents.” He noted that other software industry parties that filed briefs support CLS Bank’s argument. Solicitor General Donald Verrilli, speaking in support of CLS Bank, said the U.S. government isn’t “saying they can’t do it. We're saying they can’t monopolize it."

Justices Anthony Kennedy and Ruth Bader Ginsburg, among others, said they believed Alice’s patents were too vague to be patentable, while Justice Stephen Breyer indicated that he wanted to see patentability rules defined in a way that would eliminate broad claims but that wouldn’t eliminate patents for “real inventions with computers.” Chief Justice John Roberts said he was concerned about Verrilli’s proposal that software should only be patentable when it “is directed at improvement in computing technology or an innovation that uses computing technology to improve other technological functions. Roberts said he was “doubtful that’s going to bring about greater clarity and certainty.” Justice Sonia Sotomayor questioned whether the court should rule on “software patents at all in this case.” Justices Samuel Alito and Clarence Thomas did not speak Monday during oral argument, so “we'll have to wait and see” how they will rule, said Matt Levy, the Computer & Communications Industry Association’s patent counsel, during a conference call Monday with reporters. CCIA filed an amicus brief in support of CLS Bank that proposed requiring software to be closely tied to a particular part of computer hardware in order to be patentable (http://bit.ly/1i8Exfp).

The justices’ questions indicate they are skeptical about vague software patents but are reluctant to make wholesale changes to software patentability, Levy and other revamp advocates said during the conference call. “I'd be really shocked if at the end of the day these patents are left standing,” said Engine Advocacy Executive Director Julie Samuels. “It seems to me that the Supreme Court is going to invalidate the patents at issue, but the question remains how far they're going to go and what kind of rule they're going to set up when they do that.” The court will “not only strike down these patents but will hopefully create a workable rule that makes sense going forward,” she said. Samuels filed an amicus brief while she was still a staff attorney at the Electronic Frontier Foundation that did not propose a patentability test but urged a more robust interpretation of Section 101 (http://bit.ly/1mFTo6G). The justices will likely devise a rule that will “separate out the wheat from the chaff in terms of the software patenting area,” said Charles Duan, Public Knowledge director-Patent Reform Project. “I think that they recognize there is value to having patent protection in the software area generally -- the question is how you distinguish those patents that are like Alice’s and cover very basic fundamental ideas from the ones that are real technological innovations.” Public Knowledge filed a joint brief with the Application Developers Alliance that noted that one of the patents Alice filed was for a program that was seven code lines long. The brief cited an iPhone app written by a 14-year-old that contained more than 11,000 lines of code to show that the code line length in the Alice patent claim was “absolutely nothing,” Duan said (http://bit.ly/1ghPzwz).

Supreme Court cases involving patents can’t be separated from the larger patent revamp issue, particularly when looking at the Alice case, Samuels said. “I hope we've got some legislation in place before we get a ruling in this case, as a practical matter,” she said. “But if that’s not the case, a ruling here and legislation should continue to happen in parallel.” The House passed the Innovation Act (HR-3309), which includes a number of provisions designed to address abusive patent litigation, in early December. The Senate Judiciary Committee is currently negotiating a compromise version of the Patent Transparency and Improvements Act (S-1720), which it is set to consider at a meeting Thursday. The legislative push deals with litigation revamp while the Alice case deals specifically with patent quality, which Congress “for various political reasons has shied away” from including in legislation, Samuels said. HR-3309 originally included a provision that would have expanded the Patent and Trademark Office’s covered business method (CBM) review program, but House Judiciary Committee Chairman Bob Goodlatte, R-Va., removed it prior to that committee’s markup. Sen. Chuck Schumer, D-N.Y., has advocated including a CBM expansion in S-1720, but stakeholders have said they believe it’s unlikely to be included in the final bill (CD March 27 p13).