Why The Supreme Court Must Revisit The Alice Precedent

  • by Maxim Waldbaum

    In a global economy that becomes increasingly more digital, it should go without saying that software engineering innovation is the United States’ most important product. It should further go without saying that inventions of this sort should be protected by patent law.

    But thanks to a long series of bad decisions by the judicial system at every level—district courts, federal courts, and the United States Supreme Court itself—these things do indeed have to be said. And most importantly, these ideas must again be at the foundation of intellectual property law.

    The language in the U.S. Patent Code seems clear enough:

    “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent (emphasis added) therefore, subject to the conditions and requirements of this title.” (35 USCA Section 101)

    The “useful process” or “useful improvement” allowed courts to draw a distinction between such innovations and others that were merely “abstract principle”, with the latter not qualifying for patent protection. There’s no problem with the distinction. There’s no problem with the language itself, even though it was written in 1790. There’s no problem with the law. What we do have is a common sense problem regarding judicial interpretation that recently culminated at the Supreme Court.

    In the 2014 case of Alice Corp vs. CLS Bank International, the Court ruled that patents regarding an electronic escrow service were invalid on the grounds they were abstract principle and their implementation on a computer did not transform them into patentable subject matter. Though the case did not directly involve software, it was correctly seen as having a significant implications in this area.

    The question has to be posed to the Court—in what world does software engineering innovation not constitute a “new and useful process”? The language in the code is broad enough to allow for the numerous changes in economic life we have seen since it was first written, and in age where phrases like “digital product”, “e-commerce” and other technologically driven terminology are now freely used, how can the invention of new software product be considered merely abstract?

    Failure to provide patent protection to U.S. software engineers poses a significant long-term problem for the U.S. economy. It strips American innovators of bargaining power in the give-and-take necessary to survival on the international stage.

    Congress cannot fix this problem—decision-making on patentable subject matter must be made on a case-by-case basis and that means judges, not legislators, are going to deal with how the code is implemented. That means the Court, and since the U.S. Supreme Court spoke in Alice, they are going to ultimately have to step in again.

    On the surface the outlook may appear bleak—in a Court noted for its sharp ideological divisions, Alice was a 9-0 ruling. But recent rulings in federal court have provided some wiggle room that must be used.

    Enfish vs. Microsoft in 2016 marked the second time a federal court has ruled on software’s patent eligibility since Alice, and for the second straight time, the lower courts said that yes, software engineering is eligible.

    Before drawing too much consolation from this ruling, it has to be noted that Enfish has not exactly been greeted enthusiastically by the courts as a whole. Enfish has drawn negative references in a wide range of cases, most notably Phoenix Licensing LLC v. Consumer Cellular, Inc in March 2017.

    These rulings, contradictory on the surface, require IP attorneys to dig deeper to find the details that are swinging the cases one way or another. The basis for Enfish’s upholding of patent protection is the claim involved the specific creation of a database. The Phoenix case went the other way, as the courts found “inventive concepts” to be lacking and the invention in question requiring a “substantial amount of human involvement”.

    Absent any clarification from the Supreme Court, we can continue to expect rulings being split on these smallest of possible hairs and having a negative impact on innovation and creativity. The unsustainable inconsistency of these decisions will require the Court to clarify itself more specifically on the question of software engineering product and patent eligibility.

    The stakes are too high for the current inconsistency to stand and certainly for the way patent law has been stood on its ahead in regards to software products, to continue. It’s time for the judicial system to speak with one common-sense voice and start protecting innovation.

    Eaton & Van Winkle partner Maxim Waldbaum has worked on resolving IP disputes for over forty years and has authored several books on the subject and has specialized expertise in the arena of international commercial arbitration intellectual property. Contact Mr. Walbaum and EVW today to set up a consultation regarding your own IP legal needs