Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court’s approach to software patents applauded by AAI board member, (Jul 22, 2014)

By John W. Arden, J.D., LL.M.

In the recent Alice Corp. v. CLS Bank International decision, the U.S. Supreme Court adopted “a promising approach to the treatment of software patents that takes into consideration concerns with overly broad and potentially anticompetitive patents,” according to American Antitrust Institute (AAI) advisory board member Shubha Ghosh.

In an article posted on the AAI website, Ghosh noted that AAI submitted an amicus brief in support of CLS Bank, which brought a declaratory judgment action claiming that Alice’s patents—covering a computerized system for exchanging obligations through a trusted third party in order to mitigate risk—were invalid, unenforceable, or otherwise not infringed. Alice answered and counterclaimed for infringement. The federal district court in the District of Columbia granted CLS Bank’s motion for summary judgment, holding that each asserted claim of Alice’s four patents was invalid for failure to claim patent-eligible subject matter.

On July 9, 2012, the Federal Circuit reversed the district court, holding that the asserted claims were patent eligible. CLS Bank filed a petition for rehearing en banc, which was granted on October 9, 2012. On rehearing, no single opinion commanded a majority, but seven of the ten panel members agreed that the method and computer-readable medium claims failed to recite patent-eligible subject matter, and eight judges concluded that the particular method, medium, and system claims at issue should rise or fall together in the court’s analysis.

In an unanimous decision delivered by Justice Clarence Thomas, the Supreme Court held that the system, method, and media claims of four of the patents at issue were patent ineligible as drawn to an abstract idea under 35 U.S.C. §101. The Court explained that the exclusion of laws of nature, natural phenomena, and abstract ideas from patent-eligible subject matter by §101 was driven by a concern that upholding patents covering an abstract idea would preempt use of the approach in all fields and would effectively grant a monopoly over the idea. Allowing such monopolization would impede innovation more than it would promote it, thereby thwarting the primary object of the patent laws.

The AAI amicus brief had asked the Supreme Court to “more closely engage with the competition issues and acknowledge the anticompetitive effects of overly broad software patents” and to “adopt a causation approach which would require finding that a claimed invention is a method or means for producing a concrete result,” according to Ghosh.

“While the Court did not adopt this approach, the Court did express concern with the preemptive effects of overly broad patents,” he wrote. “Although not framed in terms of competition, the Court’s ruling implies heightened scrutiny for patent claims, especially ones dealing with software, business methods, and other process claims that entail an abstract idea or law of nature.”

Ghosh is a Vilas Research Fellow & George Young Bascom Professor in Business Law at the University of Wisconsin School of Law.

News: Antitrust