May 12, 2013

Mixed Ruling In Software Patent Case Raises More Questions Than Answers

redOrbit Staff & Wire Reports — Your Universe Online

A Washington DC-based federal appeals court has ruled that patents held by an Australian electronic financial marketplace are not valid because they are too abstract to qualify for such intellectual property protection.

The ruling, which was handed down on Friday, pertains to a computerized trading platform which had been patented by Alice Corporation, a firm which deals in trading risk management and investment contracts. It could, however, have larger implications for the software industry as a whole, according to Reuters reporter Erin Geiger Smith.

Those within the industry had been keeping a close eye on the case, hoping the US Federal Circuit Court of Appeals would “reach a consensus on how to determine what software is patentable,” Smith said. Intellectual property rights make up a large percentage of a software company´s profits, she added, and professionals were hoping to learn more about how much legal protection will be granted to those patents.

However, as Grant Gross of IDG News Service explains, the ten-judge panel was fairly divided in their ruling. Half of them sided with the majority opinion, while the other five agreed in part, but dissented in part as well.

In addition to the majority verdict, five other judges filed comments on the case, Gross said, but experts believe the overall decision “gives little guidance to courts on patent eligibility.”

What the judges did agree on in the case of CLS Bank International v. Alice Corporation was that the patents in question -- four patents pertaining to a computerized currency trading platform -- were invalid because they were based on abstract ideas. Alice had argued during the case that, even if the patents did involve abstract ideas, those ideas could be patented “if the computer plays a significant role in the invention,” Smith said.

In their ruling, the appeals court failed to establish a unified standard for determining what is abstract, Matthew Moore, a partner at Latham & Watkins LLP, who was not involved in the case, told Reuters.

Essentially, under existing patent law, the concept of something like a self-driving car cannot be patented, but the engineering that creates such an automobile can be. Based on the court´s divided option, Moore said it appears whether or not an invention is too abstract to be patented will continue to be determined on a case-by-case basis.

One of the dissenting judges, Judge Kimberly Moore, expressed concern over what the verdict means for the software industry as a whole.

“Let's be clear: if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents,” she wrote, according to Gross.