24 April, 2014

US Supreme Court to Take on Software Patents

Software patents have been a somewhat controversial topic within the IP community for some time now, especially due to their heavy association with patent trolls. These Non-Practicing Entities (NPEs) or otherwise known as Patent Assertion Entities (PAEs) exist for the sole or primary reason of enforcing patents which they own with no actual intention to ever use them themselves for the development of goods or services. As such these practices are highly questionable, at least on an ethical standpoint. The Goodlatte Innovation Act is attempting to curb these practices; however has yet to pass through the legislature and become law in the United States, following a similar approach to their Kiwi brothers in New Zealand who have since, potentially at least, ended software patents in late 2013. Software patents have been disputed in the long-going case of Alice Corporation v CLS Bank, which is being heard in the US Supreme Court, and will undoubtedly address the current state of software patents and their use in the US.

The case concerns several patents owned by Alice Corporation relating to the facilitation of securities trading, and more specifically, the reduction of risks for parties not fulfilling their part in their contractual obligations such as patent number 7725375. Independently from Alice CLS Bank developed their own software which fulfilled a similar function, potentially infringing Alice's patents. Due to this CLS sought a declaratory judgment from the courts intending for Alice's patents to be invalidated, as per their argument, the patents would not be patent eligible due to them being merely abstract ideas, not falling under the requirements of 35 USC section 101. CLS' argument asserts that what Alice have patented merely covers basic economic concepts; however Alice argue that abstract ideas should only be interpreted narrowly, including things such as facts of nature. Ultimately the Supreme Court face the dilemma of deciding how far the abstract patent doctrine extends, potentially impacting a large industry of software patents.

Soft wares can be quite nice during Winter
Abstract ideas, although expressly prohibited by the Supreme Court in their decision in Diamond v Chakrabarty, are still assessed on a case-by-case basis, still leaving ideas which seem abstract potentially within the remit of section 101. As such the Supreme Court has stated that "...Congress took this permissive approach to patent eligibility to ensure that ingenuity should receive a liberal encouragement", allowing for a wide margin of flexibility within this scope. The rationale behind the rejection of abstract ideas is because "...abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work".

In the District Court of the District Columbia Justice Collyer saw that Alice's patents were not eligible as they sought to patent, in her Honor's mind, fundamental concepts and were therefore abstract ideas. Subsequently in the Court of Appeals the decision of the District Court was reversed, deciding that "[t]he asserted claims appear to cover the practical application of a business concept in a specific way", noting their extensive implementation through computers. The limitations the patents' implementations faced was, in the Court's view, integral to their patentability, therefore not merely encompassing abstract ideas which could be implemented quite easily. CLS sought an en banc (all of the judges of a particular court reside as opposed to only a select few) rehearing of the decision. With the Court of Appeals rehearing the case en banc, the majority of the Court of Appeals' judges saw that the patents were not patentable due to their abstract nature, concurring with the initial District Court decision.

As one can very well see the case is very complex and while this article aimed to set out the basics of the case as an informative starting-point prior to the Supreme Court decision, some specifics had to be omitted. This writer would welcome any and all interested in this case to read the included source material thoroughly if you want a more nuanced understanding of the case as a whole.

The case ultimately boils down to how the Supreme Court balances a much narrower definition, preventing partly or mostly the definition of more general ideas in software, against a broad-ended, much vague definition of an abstract idea, potentially inhibiting future innovation as a result. Justice Breyer touched on this, preferring a much narrower allowance of abstractivity: "...instead of having competition on price, service and better production methods [if software patents are not allowed or restricted], we'll have competition on who has the best patent lawyer". Arguably Justice Breyer does have a point, and the backlash against software patents in the past several years would only indicate such a direction as well. But again, the issue is not that simple, and this writer for one awaits the Supreme Court's decision with interest.

Source: The Guardian

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