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10.20.14

How Patent Lawyers Analyze Alice v. CLS Bank

Posted in Patents at 5:14 am by Dr. Roy Schestowitz

Summary: Breaking down a patent lawyer’s analysis of a Supreme Court’s decision that seemingly invalidated hundreds of thousands of software patents

SHORTLY after the Alice v. CLS Bank ruling we gave several dozens of examples where patent lawyers either denied the impact of this ruling/decision on software patents or simply downplayed it. We now know that they were wrong — not necessarily lying — as software patents are being squashed by the patent office and the courts. Lawsuits have almost halved in number. The same thing happened after In Re Bilski; in sheer numbers (number of articles), patent lawyers tried to impose/project their will onto the law, overriding what’s true and what shall become legal practice. It’s rather appalling. They capture the system. Since many journalists quote these people (especially in the corporate media), it matters a lot.

“These “legal” publications tend to be more like cults of subcultures where the reality can be vastly different from that which everyone else observes.”Despite all this evidence, some patent lawyers would rather continue to ignore the facts or simply lie (at the very least distort). The other day Kelley Drye & Warren LLP published a so-called ‘analysis’ in a legal publication. These “legal” publications tend to be more like cults of subcultures where the reality can be vastly different from that which everyone else observes. David W. Long, from the Washington (DC) office of this firm, wrote this:

Patent System Benefits From Supreme Court Guidance In Alice v. CLS Bank

Benefit, right? Tell us more.

This case primarily impacts software- or computer-implemented inventions. Alice dealt with a patent on a generic computer implementing a conventional business practice of using a third-party intermediary (clearing house or escrow agent) to mitigate the “settlement risk” that a party cannot fulfill its obligation in a transaction. Each side’s consideration is exchanged once the intermediary receives the required consideration from both sides. The issue presented was whether someone could patent using generic computer components to implement “the abstract idea of intermediate settlement” that is a long-standing “fundamental practice” and “building block of the modern economy.” The Court said no.

Right. No means no. Go on then.

The short answer is: incrementally. There’s nothing earth shattering about Alice.

Except the invalidation of many software patents? Right, let’s just ignore that.

The Court applied prior decisions to a new set of facts, resulting in incremental guidance on this nuance issue. The bigger impact of Alice is that it resolved a stalemate in the Federal Circuit appeals court that is tasked with developing patent law.

CAFC has been thoroughly discredited in this area and it was found to be corrupt. It’s quite a miracle that it continues to exist, albeit some corrupt people got ousted.

Here, the Federal Circuit judges agreed that the patent claims were invalid, but they disagreed as to why and, thus, gave no guidance to practitioners. Stalemates and attendant uncertainty often happen in these gray mushy areas, so it’s significant that the Supreme Court decision breaks the stalemate to keep progress flowing.

The problem is, none of the judges (or justices) actually understands computers properly; none can write a computer program. Why are people with a fancy gown, a wooden hammer (gavel, but probably no longer a wig) deemed more competent to rule on matters such as software patents and APIs than technical folks who most likely don a T-shirt and a portable music player? Legal threatre is doing a great deal of damage to the technical community and this hurts customers (that’s everyone) too.

There has been incremental development on what is an unpatentable abstract idea, and that development should continue. So far, the Court has addressed patent eligibility in cases that involved well-known, or old, abstract ideas: Bilski was about financial hedging, and Alice was about third-party intermediaries to settle a financial contract. The really interesting question is: what do the courts do when someone develops a wholly new abstract idea?

If it’s abstract, then it does not matter if it’s new.

When someone first intuited, for example, that 2+2=4 and 2*2=4 and 22=4, this was a completely new insight. While it may have contributed greatly to society to know, it is still a fundamental building block that could not be patented from day one. If it were patented, you couldn’t build a car or anything else without paying a license fee every time that fundamental mathematical relationship was used. So we may see interesting developments in the way courts handle generic computer implementation of new abstract ideas, though such case law development will be a marathon, not a sprint.

Mathematics was not much of a new insight. It was only formalised at some later stage, using some particular notation, e.g. decimal numbers (base 10). At no stage was a patent suitable and just because we encode mathematics in binary form now (or let machines do so) does not mean we are entitled to patents.

Some patents will have this issue, but that’s par for the course since any patent might be challenged on any number of grounds, such as prior art or definiteness. The news is that Alice gave us helpful tools that practitioners can use in evaluating patents, and we will see development in this area near term. Already, we’re seeing that more district courts are invalidating patents on this ground at the motion-to-dismiss stage, which is very early in the litigation process compared to the practice before Alice.

So here he is admitting that Alice v. CLS Bank did in fact change things. Why not take this further and state that software patents are now in trouble or perpetual demise? Well, granted, as even Mr. WatchTroll himself (IP Watchdog) admitted a couple of months ago, if you tell the “legal community” that software patents (or any patent type for that matter) are going away, you’re likely to be ridiculed or chastised. The problem is, the press likes to quote people who are patent lawyers for insight on patent law.

The bottom line is, whenever reading some so-called ‘analysis’ from patent lawyers about software patents, be careful. They are not writing like journalists but more like marketing people trying to attract potential clients. In the corporate press, so-called ‘journalists’ treat these ‘marketing people’ as credible authority on these subjects.

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