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The Supreme Court will decide what, if any, Software-related Inventions are Patentable and, in the meantime, Patent Claims Should Not Include Steps that Require Human Actors

By Michael R. Hull - December 24, 2013

We have recently commented on the software patent case, CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013), which introduced conflicting tests for patent eligible subject matter, causing ambiguity and confusion in the law.

While a seven-judge majority affirmed that the software-related claims at issue in CLS did not constitute patent eligible subject matter, there was no majority opinion to guide the courts or the public in interpreting the validity of software patent claims in the future. Instead, the panel of ten judges generated seven different opinions with no single opinion supported by a majority of the court. In October of 2013, Chief Judge Rader called CLS debacle the biggest failure of his judicial career:

“I think honestly, I would consider [CLS] personally my greatest failure in my judicial career,” Judge Rader said. “I think that we failed to provide the kind of guidance that I think the court of Giles Rich and Howard Markey would have provided. And so I feel a sense of responsibility for that and so, where was Giles when we needed him?”

Now comes the Supreme Court to the rescue by granting a writ of certiorari in the CLS case (Alice Corporation Pty. Ltd. v. CLS Bank International, et al., Docket No. 13-298 (Supreme Court 2013)). The patent owner, Alice, presented the following question to the Court:

Issue: 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 Court.

Alice asserted four patents against CLS. The asserted patents claim computerized methods, computer-readable media, and systems that are useful for conducting financial transactions using a third party or escrow agent to settle obligations between a first and second party, thereby mitigating “settlement risk.” Claim 33 of U.S. Patent No. 5,970,479 is illustrative:

33. A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

Hence, we will certainly have more to say about the prospects of obtaining patents for software-related inventions after the Supreme Court issues its opinion in CLS.

In the meantime, the Patent Office, or more specifically, the Patent Trial and Appeal Board (PTAB) continues to decide software patentability issues. Recently, IBM attempted to patent a “computer implemented” method and system for producing, brokering and distributing digital content. The Examiner rejected IBM’s claims under 35 U.S.C. § 101 as encompassing a human organism and an abstract idea, either of which is sufficient to render the claims unpatentable.

IBM’s claims include multiple elements that require a human being: “conducting market research,” “determining a target audience,” “determining at least one content distribution system with access to the target audience,” “negotiating deals with the at least one content distribution system,” etc. Agreeing with the Examiner, the PTAB found the claims unpatentable because they encompass a human being or group of human beings:

[W]e agree with the Examiner that the claimed content systems encompass a human being or a group of human beings, when given the broadest reasonable meaning in light of the Specification. We see nothing in the meaning of system itself or the Specification that would preclude these systems from being reasonably construed as encompassing a human being or a group of human beings. Further, we note that the Specification describes embodiments where these systems include both humans and computers, as well as, embodiments where these systems are fully automated.

Thus, while we await the Supreme Court’s opinion in CLS, we can offer one piece of salient advice when it comes to patenting software. Method claims that include steps or elements, which require a human to carry out will most likely be rejected as being patent ineligible. On the other hand, method claims that include steps or elements that are carried out by a computer or a machine may be patent eligible for now, pending the Supreme Court’s decision in CLS.