Alice v CLS Bank - Observations on the Supreme Court Transcript (04/02/14)

Some interesting stuff in the transcript of arguments in Alice v CLS Bank before the Supreme Court (attached). The court struggles to articulate how claims that could easily have been rejected under KSR obviousness analysis are unpatentable business method claims under 101.

It has been my belief for quite some time that when it comes to software patent eligibility, the courts conflate 101 with 103. That is, they argue that what seems obvious is abstract and therefore unpatentable non-statutory subject matter under a judicially-created exception to the provisions in 35 U.S.C. § 101. This muddled thinking is on display again by the court, but several Justices seem to be attacking this directly.

Here, Justice Scalia draws an analogy between a cotton gin, which simply does what people used to do by hand. Note that he actually uses the word, “novelty” here. Breyer and Kennedy jump in to figure out if there is an invention beyond “using a computer” – how this relates to abstractness, I have no idea, but it does sound like they are leaning towards a European view of the world.

JUSTICE SCALIA: Why isn't it – why isn't doing it through a computer not enough? I mean, was the cotton gin not an invention because it just means you're doing through a machine what people used to do by hand? It's not an invention. It's the same old, same old.

MR. PHILLIPS: Justice Scalia –

JUSTICE SCALIA: Why – why is a computer any different in that respect?

MR. PHILLIPS: At one level I agree with you completely. There is no difference between them.

This Court has, however, said on more than a few occasions, albeit in dicta, that coming up with an idea and then say, use a computer, is not sufficient. And what I'm trying to suggest to you is we don't fall within that dicta.

Now, if you don't accept the dicta and you say use a computer is fine, then I think we're done.

JUSTICE SCALIA: Well, I'm not saying use a computer is – is much of a novelty. I mean, that's – that goes to whether it's novel or not. If you just say use a computer, you haven't invented anything. But if you come up with a serious program that – that does it, then, you know, that may be novel. But that's a novelty issue, isn't it.

MR. PHILLIPS: To be sure, Justice Scalia.

JUSTICE BREYER: And this is exactly the question I really would like to you to focus on for me. Why is it – and I'm not saying this from a point of view, but it seems to me pretty clear that if what you did was take the idea of solvency – remember King Tut. That's what I use the exaggeration – and what you say is implemented by having the abacus man keep track and say stop, okay –

MR. PHILLIPS: Right.

JUSTICE BREYER: Then we implement it by having somebody with a pencil and a piece of paper and this is all that they add, you see. Say: Have a man with a pencil and a piece of paper keeping track and saying, stop, or we say, implement it in the computer, which will automatically keep track and say stop, are they all enough? Are some of them enough? What's the rule?

And you realize I couldn't figure out much in Prometheus to go beyond what I thought was an obvious case, leaving it up to you and your colleagues to figure out how to go further. Am I making enough – making clear enough what's bothering me? And I'd really like to get your answer to this.

MR. PHILLIPS: And – and look, there's no – I'll be the first one to – to confess that trying to use language to describe these things is not all that easy. But the way I think you can meaningfully look at this is to say that this is not simply something that was a fundamental truth, this is not something that simply says use a computer. It's not simply something that says maintain solvency. It – it operates in a much more specific and concrete environment where you're dealing with a problem that's been in existence since the 1970s, a solution in the 1990s, that CLS itself acknowledges needed a solution and came forward with their own solution that looks a lot like ours.

JUSTICE KENNEDY: But my – my initial question, and I think I can work this into King Tut, is –

(Laughter.)

JUSTICE KENNEDY: – is – is whether or not you could have patented that system, idea, process, method, without attaching a computer program.

Here, J. Sotomayor is asking defendant whether an email or a word processor would be patentable under his analysis. Defendant replies (in not so many words) that we should follow Europe's example, and remove the computer from consideration unless the computer is doing something inherently technical, and further, what is “technical” changes over time because things seem less technical when we get used to a technology like word processing:

JUSTICE SOTOMAYOR: How about email and just word processing programs?

MR. PERRY: Your Honor, a program – let me try it this way to both of your questions. In our view, if what is claimed as the inventive contribution under Mayo – in other words, if we have an abstract idea, as we do here, and what is claimed is the inventive contribution for Step 2 is the computer, then the computer must be essential to that operation and represent an advancement in computer science or other technology. And we know that's not met here, Justice Sotomayor, because

JUSTICE SOTOMAYOR: So you're saying no to email and word processing.

MR. PERRY: Your Honor, I think at a point –

JUSTICE SOTOMAYOR: They certainly have functionality and and improvement of functionality for the user.

MR. PERRY: At a point in time in the past, I think both of those would have been technological advances that were patentable.

JUSTICE SOTOMAYOR: How?

MR. PERRY: Today – because they would have provided a technological solution to a then unmet problem. Today, reciting, and do it on a word processor is no different than and do it on a typewriter or – and do it on a calculator.

The inventive contribution component, which uses specifically the language of conventional and routine and well understood, will evolve with technology. That's why it's different than the abstract idea component.

And here we know that these patents don't claim anything that was not conventional, well understood, and routine. We went through that in great detail, and Alice has never disputed a word of it. They just say you're not supposed to do that analysis, even though the Court, 9-0 in Mayo said we should.

And in this case, it's very important to look at what Alice's own experts said on the subject. This is not our expert. This is Alice's expert. And this is at Page 132728 of the Joint Appendix. “It is possible to do the business methods of maintaining accounts, adjusting accounts, and providing an instruction without a computer or other hardware.”

And then, Justice Breyer, directly to your abacus. If someone had thought of this invention, so-called invention, 100 years ago, they might have implemented it in a nonelectronic manner using various precomputing tools such as an abacus or handwritten ledgers.

We know from Benson, the Court's seminal computer implementation case, that if you can do it by head and hand, then the computer doesn't add anything inventive within the meaning of the 101 exception. That is the holding of Benson. And the Court reiterated that in Mayo.

Flook said exactly the same thing. If you can do it with pencil and paper, then the computer is not offering anything that the patent laws are or should be concerned with. It is only where the method will not work without a computer, which is not these claims, and where the computer itself is doing something that the patent law is willing to protect.

Justice Ginsgburg asked, if this court's precedent is so clear, why did the Federal Circuit split so many different ways? The defendant responds, “they ignored it”:

JUSTICE GINSBURG: The Federal Circuit in this case split in many ways, and it had our decisions to deal with. You said, given Bilski and Mayo, this is an easy case. What is the instruction that escaped a good number of judges on the Federal Circuit? How would you state the rule?

MR. PERRY: Your Honor, I think there's a significant element to the Federal Circuit that disagrees with Mayo and has been resistant in applying it. Chief Judge – former Chief Judge Michelle filed a brief in this Court essentially saying Mayo is a life-sciences case, You should limit it to that because if you apply it to everything else, then these patents are no good.

Mayo we submit is a technology-neutral, industry-neutral, exception-neutral framework that can be used to answer all of these questions. This is not the death of software patents. The software industry is all before this Court saying, this is fine with us. Every company in the United States practically except for IBM is saying, go ahead. This will not affect software patents.

Justice Ginsburg, this Court's precedents are clear. They are unanimous. They just need to be applied. To suggest that there is confusion that needs to be addressed by retreating, beating a retreat from recent unanimous decisions, would simply reward intransigence, difficulty, refusal to adhere to what are clear precedents because – [interrupted by Justice Kagan]

In the testimony of the U.S. government, as amicus curiae, the representative comes out whole-hog for the European rule, but quickly withers under questioning of Sotomayor:

GENERAL VERRILLI: Mr. Chief Justice, and may it please the Court:

An abstract idea does not become patent-eligible merely by tacking on an instruction to use a computer to carry it out. A computer makes a difference under Section 101 when it imposes a meaningful limit on the patent claim. That occurs when the claim is directed at improvement in computing technology or an innovation that uses computing technology to improve other technological functions. That's the test that we believe is most faithful to this Court's precedents in Bilski and Mayo. It keeps patents within their traditional and appropriate domain and it is capable of being administered consistently by Courts and by PTO examiners.

JUSTICE GINSBURG: How do you answer the argument that your view would extinguish business method patents and make all software ineligible for patent protection?

GENERAL VERRILLI: Yeah, with – let me address software patents first because that, I think, is obviously a significant question. And it's just not correct to say that our approach would make software patenting ineligible. Any software patent that improves the functioning of the computer technology is eligible. Any software patent that improves – that is used to improve another technology is eligible. For example, the patent in the – in the Diehr case is one in which

JUSTICE SOTOMAYOR: Why do we need to reach this in that – reach software patents at all in this case?

GENERAL VERRILLI: Well –

JUSTICE SOTOMAYOR: What's the necessity for us to announce a general rule with respect to software? There is no software being patented in this case.

GENERAL VERRILLI: Well, I –

JUSTICE SOTOMAYOR: There's a systems.

GENERAL VERRILLI: Well, I – I think well, they – they there's a process being and – and one can think of software patents as process patents. And I think that's why my friends on the other side are saying the sky is falling because they they are interpreting what we're saying about that when a computer makes – when a computer's involvement makes something eligible under 101, it's calling those into question, and it doesn't.

JUSTICE SOTOMAYOR: Do you think we have to reach the patentability of software to answer this case?

GENERAL VERRILLI: Well, I think you can – I think the answer to that question is no, not necessarily. You can decide it by saying that that Bilski answers the question whether this is an abstract idea, because this form of hedging is really no different than the form of hedging as a conceptual matter at issue in Bilski. And then Mayo answers the question of whether the use of a computer in this case adds enough to the abstract idea beyond conventional steps, because here all we have, after all, is just conventional use of computing technology, no computer innovation, such that you don't qualify under 101. You could take that approach.

But it is important to the United States that we – and to our patent examiners that we get some clarity, if we can. I think the clarity could come from the text that I propose, which I want to reiterate

JUSTICE SOTOMAYOR: Well –

JUSTICE BREYER: Could – could – could you go on with that because you were just getting to the point where I think you say a computer improvement that, in fact, leads to an improvement in harvesting cotton is an improvement through a computer of technology, so it qualifies.

But then I think you were going to say, or I got this also from the brief, a computer improvement that leads to an improvement in the methods of selling bonds over the telephone is not an improvement in technology reached by the computer. Am I right about the distinction you're making?

GENERAL VERRILLI: I don't think there's a yes or no answer to that question.