(PRWEB) July 09, 2014
An “inventive” idea with tangible effects deserves a patent, but an attempt to patent abstract business ideas doesn’t meet those standards, the U.S. Supreme Court recently decided in Alice Corporation v. CLS Bank International (Docket #13-298).
In its ruling, the court stressed the need to preserve a patent-free zone did not want patent owners monopolizing basic tools for scientific and technological work,, according to Professor Daryl Lim of The John Marshall Law School. The case has profound implications for the financial services sectors, and those involved in the collection and analysis of Big Data, including social media services, cloud computing and wearable technology, Lim added.
“Einstein couldn’t patent his theory of relativity simply by saying a computer would do the calculations,” Lim added. “The idea must improve the way a specific type of computer function, and that connection must not have been well-understood, routine or conventional, but rather achieve a result that was not obtainable before.”
Alice Corp. argued it held the rights to a computer program used to guarantee payments for financial trades settled by holding funds in escrow. Alice Corp. argued that its computer software protecting these payments was first patented in 1992. However, developer Ian Shepherd failed to produce the computer source codes or how the computer would work for these escrow payments. Despite these shortcomings, the U.S. Patent and Trademark Office gave Alice Corp. three subsequent patents for its process.
The corporation never used the patented system in any business. Consequently, the company has been dubbed a patent troll.
When Alice Corp. learned CLS Bank was using a similar technology, it argued patent infringement. CLS Bank claimed it developed its own computer system for the trillions of dollars transferred through its banking network. In 2007, CLS Bank sued Alice Corp., charging its patents were unenforceable. Lower courts agreed with CLS Bank, but Alice Corp. countersued.
The United States Supreme Court struck down the patent claims by Alice Corp. Writing for the court, Justice Clarence Thomas said Shepherd’s patent filings amounted to “nothing significantly more than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.”
The court also found ineligible Alice Corp.’s other patent claims to a computer system carrying out those instructions and components for the computer codes for substantially the same reasons, Lim said.
“The court’s focus on a tangible effect was clearly an attempt to raise the bar on software patents which form the bulk of the litigation currently clogging up the courts,” Lim said. “But it also knew from the briefs filed that many software and Internet companies need these types of patents to get funding. For these companies, having those patents is an existential issue.”
The court also clarified its rules on patent eligibility. Shortly after the case was decided unanimously June 19, 2014, the Patent and Trademark Office instructed its patent examiners to apply the same framework across all technology fields, as well as to inventions covering both devices and methods.
“Those seeking clear, crisp rules in this area will never find them. While some patent attorneys have criticized the decision for providing little guidance on what qualifies as an abstract idea, other attorneys who recognize the decision as more than just a data point will be well-placed to capitalize on the lessons the court has offered,” Lim said.
“Savvy defendant attorneys know that they must now argue that the contested patents cover perfunctory improvements, and plaintiff attorneys know that tying an idea to a general purpose computer will not work. Attorneys also know that while it may be more difficult to get software and business method patents, those tend to be well suited to trade secret protection.”
Daryl Lim is a law professor at The John Marshall Law School in Chicago. He specializes in intellectual property and antitrust law.