Supreme Court: Settlement Risk Ideas Not Patentable

The U.S. Supreme Court today continued its recent interest in reviewing patent cases, ruling unanimously (9-0) (by Justice Clarence Thomas) that software designs for using computers to mitigate settlement risk in financial transactions are not patentable because they embody only abstract ideas (Alice Corp v. CLS Bank Int’l). The Supreme Court affirmed the Federal Circuit’s denial of the patent (the Federal Circuit is a specialized federal court of appeals based in Washington, D.C., which handles patent cases). As the Court explains, for an idea or invention or process to be eligible for a patent, it must move beyond the abstract stage to the practical application stage – is it novel, does it instruct another person learned in the art, it is non-obvious, etc? So no settlement risk patent. Additional coverage and analysis from the Patently-O and How Appealing blogs.

Chief Justice John Roberts expressed interest in technology cases early in his tenure on the Court,  and sure enough, the Court has been taking on numerous patent cases from the Federal Circuit. None of the Justices have the technical, scientific, or engineering background usually associated with patent law, so why the interest? One reason may be the rise of software patents like the one at issue in today’s case, with increasingly complicated code and algorithms. Traditionally, a patent was awarded for an inventor’s ingenuity in producing the proverbial better mousetrap. But since the 1990s, with the rise of computers and the digital age, more patents are being issued for computer driven processes, methods, and software – things that might traditionally been the dominion of the copyright law. In today’s case, the patent didn’t involve any people – just computers sending data back and forth, to lower risk in financial transaction, semi akin to some hedge funds, high frequency trading, or other electronic-only financial innovations. If the patent bar believes the rise of software patents is a bad thing or weakens the quality and rigor of patents generally, and they’ve won some allies in the judiciary, the Court may be stepping in more often to send a signal to the USPTO, Congress, and people seeking these patents that they’re not eligible under America’s patent law. A sort of “nice try, but no cigar, go back to the drawing board.” In being the final interpreter of U.S. law, the Supreme Court’s job includes resolving lower court conflicts (so federal law is uniform on the books and in application); checking and balancing excesses in lower courts (e.g. reversing the Ninth Circuit or others when they misread or misapply the law); ensuring rights, liberties, federalism, and separation of powers are respected when politicians get bad ideas; striking down laws that violate the Constitution; and sometimes sending signals to Congress or Governmental agencies (e.g. this statute has a hole, so fix it; or don’t grant patents to inventions like this).

If my firm, Johnson Law KC LLC, can help you, your business, or your nonprofit with IP or patent litigation, call me (913-707-9220) or email me to schedule a free, convenient consultation.

(c) 2014, Stephen M. Johnson, Esq.

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