Software Patents

The Federal Circuit finally issued its long-anticipated decision in a high-profile software patent lawsuit called CLS Bank v. Alice Corp.  The appellate issue before the Federal Circuit was whether a patent on a computerized trading platform was eligible patent subject matter under Section 101 of the Patent Act.  The Federal Circuit, sitting en banc, concluded the patent claims were invalid.  In so doing, the case spawned several opinions without one majority rationale for why invalidating the claims was appropriate.

The patent claims relate to a computerized trading platform for conducting financial transactions where a third party settles obligations between a first and a second party in order to eliminate settlement risk, along with the additional steps of creating a record, obtaining a balance, performing an adjustment, and instructing an exchange based on the adjustment.

The different opinions offered different rationales for why the claims were invalid.  Some judges believed that the referenced claims identified abstract ideas not susceptible to patent protection.  Others found that regardless of the manner the claims were written, ultimately the claims required implementation of a basic, abstract idea.  Still yet, others disagreed with that, and believed that the system claim limitations recited sufficiently detailed algorithms such that additional structural and functional limitations were claimed leaving the system concrete and not an abstract idea. In all, there were five separate opinions, demonstrating the absence of a clear rationale.

Where does this leave software patents?  Well, the court did not hold that all software is ineligible for patent protection under Section 101.  So, it means that litigation over software patents will continue on a case-by-case basis in the district courts.


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One LLP is an elite intellectual property and entertainment law boutique with offices in Los Angeles and Orange County. The firm is especially known for handling high-profile copyright, trademark, patent and business litigation.

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