By Erin Geiger Smith
NEW YORK May 10 A federal appeals court on
Friday ruled that Australia's Alice Corp does not hold valid
patents on a computerized trading platform, but it remained
unclear how the decision would affect other software patents.
The software industry had been watching the case for a clue
to legal protection of intellectual property rights that
generate much of the sector's profits. But the U.S. Federal
Circuit Court of Appeals failed to reach a consensus on how to
determine what software is patentable.
How innovative an invention should have to be to receive
legal protection is an issue of debate in the software industry.
Technology companies had hoped the Federal Circuit, which
specializes in patent cases, would provide clarity on what
software is patentable.
The deeply divided court upheld a Washington D.C.-based
district court's decision that patents held by Alice were based
on abstract ideas, which is not eligible for patent protection.
In the case, Alice had argued that even if its patents for
exchanging financial obligations involved an abstract idea, the
idea is "patentable if the computer plays a significant role in
Adam Perlman, an attorney for Alice, declined to comment.
Alice is owned in part by National Australia Bank Ltd.
The court did not come up with any unified standard for
determining what is abstract, said Fabio Marino, intellectual
property partner at McDermott Will & Emery, adding that the
court appears to be trying to settle on a test. Marino was not
involved in the case.
Under patent law, an abstract concept - such as the idea of
a self-driving car - may not be patented, but the engineering
that creates a self-driving car may be patented.
Google Inc and Dell Inc both had filed
friend-of-the-court briefs stating that "bare-bones" patents
like those owned by Alice court do not innovate enough to
deserve patent protection.
International Business Machines Corp, however, said
that most software inventions do qualify for patent protection.
In Friday's opinion, five judges joined a portion of the
opinion, authored by Circuit Judge Alan Lourie, that suggested
judges ask whether there are "genuine human contributions" to
the invention when determining whether it should receive patent
That type of analysis will still give the district courts a
lot of discretion when examining patents, attorney Marino said.
"It's a little bit of a 'we know it when we see it'" standard,
It will take future cases to determine whether the test can
earn the support of a majority of the Federal Circuit or the
U.S. Supreme Court.
The Federal Circuit's Chief Judge, Randall Rader, did not
join that portion of the opinion authored and noted that the
test is not precedent-setting.
In a dissenting opinion, Judge Kimberly Moore said that the
test described by Lourie could cause a "free fall" in the patent
system and that the opinion defines what is "abstract" much too
CLS is pleased that the district court's decision was
affirmed and said the appeals court's decision "strikes an
appropriate balance between innovation and competition."
The case is CLS Bank International v Alice Corporation, U.S.
Court of Appeals for the Federal Circuit, No. 2011-1301.