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The future of software-related patents

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On June 19, 2014, the Supreme Court of the United States issued its long-awaited decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al. The Court held that patent claims that are directed to an abstract idea are not patentable under 35 USC 101. Those in the software field will be relieved to know that software as a whole is still eligible for patent protection.

In order to obtain a patent for an invention, the invention has to be directed to subject matter that is eligible for a patent under 35 USC 101. That is, the invention has to be directed to a process, machine, manufacture or composition of matter. Subject matter not eligible for patent protection are laws of nature, physical phenomena and abstract ideas.

Alice Corp. owned patents that disclosed a scheme for mitigating settlement risk. The Alice Corp. patents claimed a method for exchanging financial obligations, a computer system configured to carry out the method for exchanging these obligations, and a computer readable medium containing program code for performing the method of exchanging obligations.

The court held that the claims were directed to an abstract idea and, therefore, are not eligible for patent protection under 35 USC 101. Specifically, the court reasoned that the claims are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. The court stated that the concept of intermediated settlement is a fundamental economic practice that has been long prevalent in our system of commerce and that the use of a third-party intermediary is a building block of the modern economy. Therefore, the court concluded that intermediated settlement is an abstract idea that is not subject to patent protection under 35 USC 101, and that the Alice Corp. patents were invalid. Unenforceability suggests an additional issue of inequitable conduct.

Based on this decision, it is likely that future software-related inventions that are directed to fundamental economic practices or use fundamental building blocks of the modern economy will not be eligible for patent protection. However, software-related inventions as a whole are still eligible for a patent. So long as the software-related invention is not merely implementing a well-known concept, the invention should still be eligible for patent protection. The USPTO would consider issues of novelty and non-obviousness after making the threshold decision of patent-eligibility.

Ms. Uy is a partner in Sughrue's San Diego office. Ms. Uy prepares and prosecutes applications relating to the computer software, mechanical and electrical arts. Such work has included applications directed to areas of computers including computer hardware and computer architecture, telecommunications, mobile communications, voice processing, medical imaging and networks. Ms. Uy also has experience prosecuting applications directed to memory management including the restoration and recovery of memory data, data compression, data encryption/decryption and data storage. Her practice also includes prosecuting patent applications before the Board of Patent Appeals and Interferences at the U.S. Patent and Trademark Office.

Founded in 1957, Sughrue Mion, PLLC, is one of the largest law firms practicing exclusively in the field of intellectual property law. Based in Washington, D.C., with offices in San Diego and Tokyo, Sughrue specializes in litigating intellectual property matters in the U.S. Patent and Trademark Office, Federal Courts and before the International Trade Commission. Sughrue has obtained more patents for its clients than any other firm in the U.S. and is consistently one of the leading trademark registration firms. For more information, please visit sughrue.com.

-Submitted by Ruthleen E. Uy, partner, Sughrue Mion PLLC

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