Kaye Scholer Scores Victory for CLS Bank in Patent Infringement Case

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Court’s Decision Addresses Key Issues Left Unanswered by the U.S. Supreme Court’s Decision in Bilski v. Kappos

Kaye Scholer LLP announced today that the firm obtained summary judgment for its client CLS Bank in CLS Bank v. Alice Corp., a litigation asserting patent infringement brought under four U.S. patents directed to computer-implemented methods, systems, and products for exchanging a financial obligation, because each of the patent claims was directed to an “abstract idea” and was invalid because it was directed to non-patentable subject matter.

The case confronts issues concerning patentable subject matter related to Bilski v. Kappos. By extending the reasoning in last year’s Bilski case to invalidate “abstract” business methods on a general purpose computer, this case will have an impact on the scope of the abstract idea exception, which had not been addressed either by the Federal Circuit or by the Supreme Court in their respective Bilski decisions.

The Kaye Scholer team was led by William A. Tanenbaum and the case was argued by Steven J. Glassman. They were assisted in briefing by Stephen J. Elliott.

“This ruling will likely affect thousands of pending business method patents and how future cases are decided,” said Mr. Tanenbaum. “If the decision is affirmed by the Federal Circuit, it will discourage practitioners from attempting to recast business methods in other forms, will make it more difficult for business and financial method and system claims to pass muster, and will provide much-needed guidance in this important field.”

The patent claims asserted in the March 9th U.S. District Court for the District of Columbia opinion (No. 07-974) involved methods of exchanging obligations between parties if there is adequate value in accounts maintained by an independent institution, computerized systems that implement the methods, and computer products employing software to carry out the methods. The methods and systems used by CLS and subject to the claims of patent infringement are used to settle most of the world’s foreign exchange transactions, with an average daily value of about $4 trillion.

The District Court held that a method of doing business “directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk” is a “basic business or financial concept” similar to the hedging method invalidated by the Supreme Court in Bilski (No. 08–964).

The District Court held that such a method was not rendered patentable when the method was implemented electronically on a general purpose computer, and further, that “a computer system merely ‘configured’ to implement an abstract method is no more patentable than an abstract method that is simply ‘electronically’ implemented.”

The Court’s decision, in CLS Bank, while subject to appeal to the Federal Circuit, is likely to have broad significance, especially in areas such as financial services, data processing, and the pharmaceutical industry where methods of doing business, including those using computers and implemented by software, are prominent.

In dismissing all of the patent claims — including not only the method claims, but the system claims and product claims as well — under the abstract idea exception to patentability, the Court addressed questions as to the scope of the abstract idea exception that had not been addressed either by the Federal Circuit or by the Supreme Court in their respective Bilski decisions.

About Kaye Scholer
Kaye Scholer refers to the international law firm Kaye Scholer LLP and its affiliates, with offices in Chicago, Frankfurt, London, Los Angeles, New York, Palo Alto, Shanghai, Washington, DC, and West Palm Beach. Founded in New York City in 1917, Kaye Scholer represents public and private companies, governmental entities, financial institutions, and other organizations in matters around the world.
Additional information is available on the firm’s website: http://www.kayescholer.com.

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Michael Phillips
Rubenstein Associates
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