Software Turns to the Supremes for Guidance

After the U.S. Court of Appeals for the Federal Circuit (CAFC) had two bites at the apple to set forth a useful analytical framework on the proper analysis regarding subject matter eligibility of software patents under 35 U.S.C. § 101 (panel and rehearing en banc decisions here), petitioners have taken their case to the great Supremes and they in turn granted the writ of certiorari earlier this month.

The CAFC’s May en banc decision was so conflicted with differing approaches at odds with U.S. Supreme Court (SCOTUS) and CAFC precedent that it left petitioners little choice but to petition the high court for some meaningful guidance.  It is particularly telling that the U.S. Patent and Trademark Office responded shortly after the May decision to make clear that despite the decision potentially spelling the end of software patents, “no change in examination procedure for evaluating subject matter eligibility” would be incorporated by its examining corps since consensus in the CAFC decision was lacking.

In Alice Corp. v. CLS Bank Intl., SCOTUS is presented with the following question: “Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this [Supreme] Court?”

The specific invention at issue in Alice Corp. relates to computers and hardware configured to run with software to collectively create a computerized trading platform that manages risk between two parties conducting a financial transaction.  The claims utilize variations of this concept through methods, apparatuses, and systems.  After stops at the district court and the CAFC, the methods, apparatus, and systems claims are presently regarded as ineligible subject matter under § 101.

Petitioners argue that CAFC Judge Lourie’s lead opinion in the en banc decision is inconsistent with SCOTUS precedent.  Specifically, Lourie analyzed § 101 by asking (1) whether the subject matter falls within the four classes of subject matter and, if so, (2) whether “the claim pose[s] any risk of preempting an abstract idea[.]”  Petitioners argue that in analyzing prong (2), Lourie picks and chooses portions of a claim in isolation to identify potentially abstract ideas that would prevent the claim as a whole from being eligible subject matter, thereby conflicting with SCOTUS precedent as to the proper § 101 analysis.

Citing CAFC Chief Judge Rader’s dissenting-in-part and concurring-in-part opinion for support, petitioners point out that § 101 is intentionally broad and thus devoid of any reference to software being foreclosed from patent protection.  Accordingly, petitioners argue that the proper analysis focuses on whether the “claim as a whole” as taught by SCOTUS in Diehr (and later confirmed in Bilski) is directed toward “an abstract idea.”  If the opposite were true, isolated portions of a claim that potentially recite an abstract idea would risk rendering the claim on the whole as ineligible subject matter.  Because a claim typically “can be stripped down . . . until at its core, something that could be characterized as an abstract idea is revealed,” Lourie’s standard from the lead opinion threatens to undermine eligibility of not just software but all claims that utilize one or more potentially abstract ideas (nearly every invention arguably builds upon some form of an abstract idea) even if the claims otherwise satisfy §§101, 102, 103, and 112.

In their Opposition Brief, respondents look to Mayo for support arguing that § 101 should be analyzed by “first identifying the abstract idea . . . and then asking, what else is there in the claims?” In other words, each element of a claim is analyzed in isolation as to its “abstractness” and all remaining features are similarly examined in isolation to determine whether the isolated features when combined are “sufficient to transform the nature of the claim.”  On its face, this approach appears to conflict with Diehr in that it “dissects the claims into . . . elements and ignore[s] the presence of the old elements in the analysis.”

Respondents also delve into constructing the inventive concept of petitioners’ claims citing Bilski for justification, which adds further tension to the § 101 analysis and the appropriateness of analyzing the merits of a claimed invention, including novelty and obviousness, in the context of subject matter eligibility.

Interested parties including the software community, practitioners in the field, and even the solicitor general hope SCOTUS will respond decisively to this intra-circuit split with some semblance of a decipherable analytical framework for subject matter eligibility of software patents. Such a decision will resolve the uncertainty in the industry and the concomitant impact such uncertainty caused.