Did Alice Jurisprudentially Kill Software Patents?

-- By ElizabethBrandt - 01 Nov 2016

Introduction

There are many policy reasons, some of which we’ve discussed in class, to either support or oppose patents directed to software. This post sets aside the policy aspects of software patents and seeks to understand whether software patents are jurisprudentially dead after the Supreme Court’s opinion in Alice Corp v. CLS Bank International. This post argues that Alice already declared software as ineligible for patenting despite the Supreme Court’s lack of clarity. I first explore the jurisprudence leading up to the Alice decision, then discuss Alice_’s holding itself, and finally touch on the recent _Intellectual Ventures case in the Federal Circuit.

Pre Alice §101 Jurisprudence

To understand the holding in Alice, one first needs to look at the Supreme Court’s prior holdings in patent law discussing 35 U.S. Code §101, which describes the types of inventions that are patentable under United States law. On the words of the statute, which allows for the patenting of “any new and useful process, machine, manufacture, or composition of matter,” computer software seems like a patentable subject matter under the statute’s coverage of processes. However, United States courts read a number of exceptions into §101 in early cases by looking to British precedent disallowing the patenting of natural laws. While the early jurisprudential support for the exception of abstract ideas seems indefinite, the exception is well settled and oft-repeated in cases such as Benson, Diehr, Chakrabarty, and Bilski.

Chakrabarty seemed to provide a boon to software patent supporters by describing the purpose of the patent system as providing protection for the unknown and embracing new technology. The case symbolically rejects Flook, in which the court held an algorithm unpatentable on broad grounds. Chakrabarty comes to stand for the position that Congress wrote the patent statute broadly and the judicial exceptions are narrow.

However, courts have struggled with software under the statutory consideration for processes. First of all, §100(b) defines “process” as including a “process, art, or method.” The majority of the Supreme Court in Bilski says that the exception for abstract ideas flows from the language of §101 because abstract ideas are not useful. While this should seem clearly incorrect, particularly to lawyers, the court somewhat avoids this problematic language by ultimately holding that the hedging at issue in Bilski falls under the exception of abstract ideas and, therefore, is not patentable on that ground. Justice Stevens led the concurrence in agreeing that the hedging software was unpatentable, but sought to make all business methods unpatentable. This tension in the court begins to form the difficult question of how to determine what an abstract idea is and how influential the exception is on the patentability of software.

Background and Holding of Alice

The Supreme Court next took up software patents and abstract ideas in Alice. At issue in this case was a computer program that mitigated settlement risk by independently monitoring the transactions of both parties to ensure each obligation could be met.

In this case, the court agreed that intermediate settlement was an old concept and was, therefore, an abstract idea similar to the hedging program in Bilski. Under §101, a patent applicant or holder can overcome such a finding by showing that they sufficiently transform the excepted subject matter into a patent-eligible invention. In Alice, this transformation requirement went unmet because the patent holder simply tried to overcome the exception by using it in a novel environment, specifically, on a computer. The court determined that this was insufficient to overcome the exception to the abstract idea of intermediate settlement and ultimately held that if a patent did nothing more than use a “generic computer to perform generic computer functions” was ineligible.

While the Supreme Court insisted that this did not kill all software patents, read in this way, Alice seems to create a new exception to §101 process patents by holding that software patents are ineligible for patenting. By definition, software is the application of some semblance of an abstract idea to a computer, usually to more efficiently carry out that abstract idea. This is evident in both Bilski and Alice, cases in which the patent holders applied the old concepts of hedging and intermediate settlement, respectively, to the novel environment of computer programming. It is difficult to imagine a computer program that does not involve such an abstract idea given the court’s broad definition set forth in the cases discussed above.

Subsequent Jurisprudence

Alice and the preceding cases have at least somewhat stifled patent applications from the software community, anecdotally evidenced by my boss’ stipulation this past summer that patenting their algorithms was too difficult and uncertain and that keeping their products as trade secrets was a safer and easier way to conduct business.

Recently, in Intellectual Ventures, the Federal Circuit held a patent ineligible under §101 on similar grounds to Alice. While the majority opinion did not go so far as to say that all software patents are ineligible for patenting under §101, a concurring opinion from Judge Mayer did. Judge Mayer seemed to rely more heavily on policy considerations about computer programming as language and the lack of economic benefits from and even made the First Amendment argument that we discussed briefly in class. However, he also made the argument that the ruling in Alice sufficiently killed software patents and that the constitutional (and, presumably, policy) arguments are not necessary to a holding that software patents are ineligible under the patent requirements of §101.

It’s unclear if Intellectual Ventures will attempt to appeal to the Supreme Court, but given that court’s general hostility towards patents in the past, it seems unlikely that they would succeed in an appeal. However, this case would provide the Supreme Court to clarify their seemingly tension-filled contention that software patents are valid and that abstract ideas placed onto computers are ineligible for patenting. Like Judge Mayer, I would argue that the Supreme Court already ended the patent eligibility of software in 2014.

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