SCOTUS Alice Patent Ruling: Rumors of Software Patent Death Greatly Exaggerated – AGAIN

The SCOTUS recently ruled in the infamous Alice case, which the rabid anti-software patent pundits had been counting on to somehow destroy their evil nemesis.

Turns out, the ruling in the case was a big …dud, because it neither addresses software patents, nor gave any insights on how to apply the awfully-named-entirely-made-up “abstract” test used by the Courts as their new favorite “get out of patent jail free” tool to get rid of patents they don’t like.  The SCOTUS provided no further insight or boundaries for “abstract” beyond that which they had given in Bilski to help anyone understand when a claim is invalid as “abstract” or not.  In fact Justice Thomas opines:

 “In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.”

 RIGHT! Since they were so “clear” in Bilski (NOT) about what is “abstract” there is no reason (smirk) for them to “labor” and actually give anyone any insights in this case on what the term means.  Hence, as my first prediction I foresee several more years of “abstract” filings in which there will continue to be heavy use of this defense…. particularly since it is so vague that it can invoked in almost every patent case, and thus is a guaranteed generator of big fees for patent infringer defense firms.

As the “concurring” opinion (Sotomayor) suggests, this case is really about overly broad business methods not software or computers.  That is why the term “computer software” never appears anywhere in the  opinion, and why it is going to be terrifically hard for the anti-software patent lobby to make any use of what  little there is in the opinion to further their Inquisition.

A Claim Covering Only An Abstract Idea Can’t Be Saved By a Computer

The Alice patent purports to address the problem of “settlement risk” where there is a risk in an exchange that only one of two parties will actually pay its obligation or perform.    Therefore the solution proposed in the patent is that a third party ensures the exchange of either both parties’ obligations or neither obligation.

It is useful to see how the patent owner wrote the claim, and what actual language SCOTUS was looking at in Alice.  Here is the claim, along with my notes in the second and third columns:

Claim Language What it covers (simplified) Computer/Software?
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: Party A and Party BEI = party XSI= party YA and B have credit/debit records with party X No computer or software mentioned anywhere
 (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; Party Y makes an additional record of credits and debits for A and B No computer or software mentioned anywhere
(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record; Party Y gets info from Party X at beginning of day for A, B No computer or software mentioned anywhere
(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 Party Y adjusts A, B credits and debits in chronological order during the day, doesn’t allow transactions in which debits exceed credits No computer or software mentioned anywhere
(d) at the end-of-day, the supervisory institution instructing on[e] 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. Party Y tells party X to adjust its records at end of day based on transactionsThe credits and debts are irrevocable obligations on party X No computer or software mentioned anywhere

It is hard to see how the anti-software patent lobby can do anything with this “landmark” ruling, but I’m sure it will not dissuade the rabid hounds.  Not only is there no computer or software explicitly mentioned anywhere, the claim itself apparently involves no technology of ANY kind to be implemented.   (Sidenote: I realize that the parties “stipulated” that a computer was required to practice the claims, but that was nothing more than a procedural nicety, and the lack of any direct mention I’m sure could not wipe away the first impression of how broadly the claim reads on its face.)

IMO this ruling therefore will change nothing vis-à-vis the merits or robustness of software or computer related patents. At worst it will affect a tiny number of cases in which applicants recited pure business method steps that:

 1) are not tied to any machine or processing of any kind;

2) when coupled to a computer or machine, nonetheless don’t involve any significant processing by such machine;

 3) could be performed ENTIRELY by human activity, either as a mental process or, at worst, with pen and paper;

 The impact therefore will be minimal, but again that doesn’t mean the opinion won’t be discussed and contorted  to generate more legal fees and “faux” academic studies subsidized by anti-patent interests.  The entrenched corporate infringers already have their minions, lackeys and spin machines out in force as I write this piece, scouring the opinion for obscure clues like Talmudic scholars in the hopes they can find some tiny nugget they can use to distort Alice into an indictment of computer software patent cases.

Alice Was Less About “Abstract” Idea And More About Plain Old Prior Art

A few additional thoughts about the “abstract” test used by the SCOTUS are in order.  Again conveniently the Supremes gave no explanation about what how this term can be reasonably bounded.   The case law here is rapidly morphing into 1st amendment pornography jurisprudence where many years ago the Supremes similarly articulated the “we can’t define it but we know it when we see it” standard.

From the oral arguments it is apparent the SCOTUS doesn’t seem to like the fact that the Alice claim is broad and in their opinion covers every implementation of mitigating “settlement risk” including old prior art methods.  But as people who actually know patent law will tell you, there is a better and more accurate way of dealing with such issues.  Anyone who has practiced in this field for 30 years can tell that §101 was not designed for this purpose, because on its face the statute is very broad.

Rather the claim could have been attacked for overbreadth.  It is extremely broad and any perceived failure could implicate §112 (lack of sufficient disclosure to cover all embodiments) but not §101.  There is a reasonable amount of good case law here including the discussion and holding in the LizardTech case.

In addition, because the claim is so …broad, it would be easily assailed by prior art.  It should have received a §102/103 rejection based on well-known methods in the art of using third parties to monitor/guarantee transactions.  If one reads the claim, there is no restriction on what the “shadow” credit record looks like, how it is created or how it is maintained.  There is no explanation of the exchanges and the supervisory institutions, or how they interact.  There is no limitation on how the records are “obtained” at the beginning of the day, how the balances are kept, etc.  Other than the fact that the adjustment takes place in “chronological order” there is no meaningful limitation here either.  And so on and so on.

From all appearances the Alice method seems to have been used by numerous entities over the years, including….(dis)organized crime? over the past ….. 100+? years

Think about it; all the pieces fit perfectly:

  • Party A, B = betting/loan seeking saps
  • Party X (Bookie = “Exchange” for credits/bets)
  • Party Y (Organized crime= “Supervisor”)
  • A and B make bets or commitments that are kept track by bookies/loan sharks (X).
  • The bookies report to the mob (Y), who keeps their own “shadow(y)” record of the bets.
  • At end of the day the main bosses tell the bookies who stands where vis-à-vis “accounting”

oh, and just TRY to exceed your credit with the mob, and you’ll see what happens.

I suppose it would have been too unsavory or self-incriminating for the government examiners to admit they are aware of this prior art practice.  But I’m certain there were plenty of other examples to pick from.

Other Notes

It is interesting to see how far afield and disconnected the SCOTUS has become on all matters patent. They start off the discussion with this statement:

We must first determine whether the claims at issue are directed to a patent-ineligible concept. We conclude that they are: These claims are drawn to the abstract idea of intermediated settlement.

The statute (§101) however makes no mention of “patent-ineligible” concepts, and does not delineate, define or set out a special class of claims that are per se “ineligible.”  Rather the statute only talks of inclusion of certain subject matter, and defines very broadly what IS eligible, namely, “methods” such as the sort obtained by Alice here.

But that doesn’t stop them from killing patents they don’t like on the wrong basis, because they have already decided the patent fails on the merits in some other respect.  It’s the old “I can’t convict you of this crime but I’m SURE you committed another crime” standard.  Here their “bias” that somehow the patent was already in the prior art pretty much ensured that they would rubber stamp the death certificate on this one even if the path was torturous.

The Future of “Abstract” & Software patents

There are a few interesting cases that are now pending that could further qualify what the future is for software patents.

First, it is clear the anti-software patent crowd is now pinning their hopes on the second Ultramercial opinion now pending cert before the SCOTUS.  They see this as another opportunity to try and get rid of patents that interfere with their clients’ ability to freely “innovate” – which in their industry parlance means using other people’s ideas in the computer software area without paying for them.  Since the SCOTUS in Bilski and Alice has failed the corporate squatters in their quest to kill SW patents en masse, they have to be content killing patents one at a time ala Alice until some new magic anti-software patent spray is formulated by the Court.  One can read in their recent materials that their sleight of hand now posits Ultramercial not as a software case, but, rather, mostly as an …”Internet” case.   Presumably this little reality distortion – to disconnect the Internet from software – is presented as way to back-door the “Internet” itself into some kind of patent-free safe haven.

Good luck with that!

Second, the CAFC is due to issue its opinion in Google/buySAFE any day now, where Judge Stark in DE made similar convenient use of §101 to bludgeon buySAFE’s patent in the proceedings below.  At the oral arguments it was apparent, however, that the CAFC did not buy into the lower court’s broad brush application of §101 to kill the buySAFE patent.

Here is that the buySAFE claim says:

 A method, comprising:

receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;

processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,

wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

 One can already see how this claim was more carefully crafted and is more immune to the pure “abstract idea” attacked in Alice.  The  buySAFE claim has computers processing, offering and binding – on their own – and in an particular way (after the transaction closes).  When the CAFC buySAFE opinion is released I suspect it will be “Alice-Proofed” with ample discussion of the difference in the two claims, and a thorough explanation of why the claim in buySAFE is not drawn just to an “abstract” idea.   This will leave Google (one of the most vociferous and best paying sponsors of anti-software propaganda and legislation) with an appeal to the SCOTUS.

For an entertaining few minutes, listen to the oral argument sometime, particularly the amusing parts where the CAFC judges skewer the Google lawyer about their massive hypocrisy in arguing that the buySAFE patent is invalid, all the while they (Google) proudly tell the world that the equally abstract “page rank” patent is soooo important.

Listen to the parts at 13:00 – 24:30.

What the CAFC alludes to –  if you listen carefully – is that an online transaction needs a computer to check it out; therefore, that can’t be done by a human, and is pretty specific, not abstract.  Something that only recently became available on the Internet – a domain that itself is only a recent innovation – is fairly specific and not “abstract.”

At 22:15 the panel ambushes Google lawyer, and asks him effectively –  if this patent is invalid, then why isn’t the Google page rank patent invalid as “abstract”?  Hilarity ensues as Google’s lawyer tries – in vain – to explain why the Google page rank “formula” is somehow eligible to be patented, but others … are not.

So no one thinks I am being unfair, here for the record is the “famous” Google page rank patent (6,285,999):

 1. A computer implemented method of scoring a plurality of linked documents, comprising:

obtaining a plurality of documents, at least some of the documents being linked documents, at least some of the documents being linking documents, and at least some of the documents being both linked documents and linking documents, each of the linked documents being pointed to by a link in one or more of the linking documents;

assigning a score to each of the linked documents based on scores of the one or more linking documents; and

processing the linked documents according to their scores

hmmmm… seems directed to the “abstract” idea of looking at citations on documents and scoring them according to links… and nothing that could not be done by a human from looking at such documents.  In fact, nothing in the body of the claim makes any reference to a computer whatsoever….


As others have similarly predicted, I suspect Google loses on this one.

Key Take Aways

All of the pontificating and predicting is nice, but what practical effect does the opinion have?  Here is my take:

1) Alice did not eliminate the standard that says claims can incorporate abstract ideas, and still be eligible for patentability;  See Prometheus, 132 S.Ct. at 1294 (explaining that the fact that a claim uses a basic tool does not mean it is not eligible for patenting). Instead, a claim can be patent eligible if it claims an application of an abstract idea.

For example, a cup is the tangible application of the abstract idea of containing a liquid and is one limited embodiment of that idea (which is no longer abstract). As another example, a magnetic door latch is the tangible application of the concept of magnetism and does not wholly embrace the concept of magnetism but, rather, is one limited application of the concept.

  • and the same standard described and adopted in the CAFC decision in Hulu-Ultramercial as well:

For these reasons, a claim may be premised on an abstract idea and, indeed, the abstract idea may be of central importance to the invention—the question for patent eligibility is whether the claim contains limitations that meaningfully tie that abstract idea to an actual application of that idea through meaningful limitations

 Under this standard it is easy to see why Alice failed as I noted above; there are simply no “meaningful limitations” in the claim that tie the abstract idea to an actual limited application.

2) Like Bilski, Alice simply says that if the claim is directed entirely to the “abstract” idea itself, then implementing it on a computer will not help – presumably because practicing the idea in a different realm (inside a machine) does not change its basic character.  The presence or lack of a computer, therefore, is effectively irrelevant to the opinion.

3) Alice does not increase or decrease the number of “invalid” patents, because it sets forth no new boundaries or tests for determining what is or is not “abstract” or conversely what might be a patentable “application” of an abstract idea.   IMO there is no patent that is affected by Alice that was not otherwise vulnerable before under the Bilski test.

Thus, absolutely nothing has changed on the computer software “patentability” front.  This is the most important take-away, and a conclusion shared as well by David Kappos, the former Director of the PTO.

Please appreciate that this only the opinion of someone who worked several years in the computer/software industry as an engineer, and who prosecuted, licensed, litigated and/or sold 100s of computer, software and e-commerce patents as an IP lawyer for 30 years.  If one reads the online amateur hype – mostly paid for by fervent anti-software patent pundits on corporate infringer payrolls –  comprehension results may vary.


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