US Supreme Court to decide on Patent–Eligibility of ‘Computer-Implemented Inventions’

Section 101 of US Patent Act (“35 U.S.C. § 101”) provides that one may obtain patent for invention or discovery of any new and useful subject-matter (process, machine, manufacture etc.) or for any new and useful improvement thereof. In a pending case before it, United States Supreme Court (“Supreme Court) has to decide whether claims related to ‘computer-implemented inventions’ are patent-eligible subject matter within the meaning of 35 U.S.C. § 101.

Invoking the writ jurisdiction (writ of certiorari) of the Supreme Court under 28 U.S. Code § 1254(1), Alice Corporation Pty. Ltd. (“Petitioner”) has filed a petition against the decision given in an en banc hearing. The disputed invention in the present case relates to a ‘computerised system for creating and exchanging financial instruments such as derivates’ (“INVENTCO system”). One aspect of INVENTCO system can be described as follows:

“.....specific computer system and computerized process for the execution of a previously agreed-upon exchange, known as “settlement”

To understand it more clearly, prior to the execution of an agreement to exchange financial instruments or assets, there is a stage where parties merely agree to execute the exchange. There may be situations where one of the parties, at the time of actual execution or settlement of the agreement, performs its obligation(s) but other party does not. So as to address this situation of risk, the disputed invention provides for a specifically programmed computer. Following are the features of this computerised system:

·         Maintenance of electronic account for each party – these accounts correspondent (though independent) to the real world account maintained at exchange institutions.

·         On receiving instructions to carry out the exchange, adjustment is made in parties’ electronically maintained accounts.

·         Where adequate amount is not available in these electronically maintained accounts, the computer sends instructions to the exchange institution for carrying out the transaction in the real world. There are ‘real’ exchange accounts of the parties with the exchange institution.

For protecting the above subject-matter, the patent claim of the petitioner included a computer and other hardware, along with their structural configuration, for solving a complex problem. That is, the claim of the petitioner included system, computer-reliable media and methods claim (computerised process). As can be seen from the above description, methods claim (computerised process of solving a complex problem) requires a computer before it can be implemented. The relevance of this usage of computer in a patent claim will be decided by the Court.  

In 2007, the respondent (CLS Bank International and CLS Ltd.) sued the petitioner before Federal Court thereby asserting that above patent claims are invalid, unenforceable, or otherwise not infringed. The Federal Court held that patent claims do not define a patent-eligible subject matter. When the matter reached for an en banc hearing, it was again held that asserted method and computer-readable media claims were not directed to eligible subject matter (by a majority of 7:3). Some of the important observations in the en banc decision include (as provided in the petition):

·         “...The methods claimed here draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary....” (Judge Lourie for himself and four other judges)

·         “.....simply appending generic computer functionality to lend speed or efficiency to the performance of an otherwise abstract concept does not meaningfully limit claim scope for purposes of patent eligibility.....” (Judge Lourie for himself and four other judges)

·         “.....Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility...” (Judge Lourie for himself and four other judges)

·         “.....a claim embodying the machine itself, with all its structural and functional  limitations, would rarely, if ever, be an abstract idea....” (Chief Judge Radar for himself and three other judges: partly dissenting)

·         “.....each of the steps in the claimed method was “an inherent part” of such an escrow arrangement........... The claims’ reference to computer implementation was “not, by itself, enough....” (Chief Judge Radar for himself and one other judge)

The matter is currently listed for arguments on 31^st March, 2014. In the case, a number of amicus briefs which have also been filed.  The outcome of the decision will greatly impact the patent jurisprudence in United States (may be relevant for other jurisdictions as well?). I will keep posting on the developments of this major patent law case.