Scintilla – a flash, a spark, an iota. Shorthand for creativity and an indicator of inventiveness under Australian law.






Thursday, June 26, 2014

Financial risk management scheme not eligible for patent, software patents still available

By Anthony Selleck, Patent Attorney and Senior Associate

The United States Supreme Court has issued its decision in Alice Corporation v CLS Bank, a closely  watched case concerning the patentability of computer-related inventions that we have reported on in our previous posts. Although the court decided that the particular patent claims in issue were invalid as being directed to an unpatentable 'abstract idea', we do not read the decision as imposing any additional restrictions on obtaining patents for inventions involving software.

As discussed in those earlier posts, Alice Corporation's US patents cover a trading platform that seeks to mitigate settlement risk (ie the risk that only one party to an agreed-upon financial exchange will satisfy its obligation) by using a programmed computer as a neutral intermediary. CLS Bank successfully challenged the validity of the patents both at first instance and (by majority) on appeal. The Supreme Court has now agreed with those earlier decisions that the patents were not directed to patentable subject matter.

The starting point for an analysis of patentable subject matter under US law is the principle that 'laws of nature, natural phenomena, and abstract ideas are not patentable'. In its decision, the Supreme Court formulated a two-part methodology for applying the principle to claims that include an element of computer implementation. The methodology involves:

  • considering whether the claims at issue are directed to an abstract concept; and
  • asking whether the claim’s elements, considered both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application.

In applying the first part of the methodology, the court concluded that the claims were indeed directed to an abstract idea, namely the concept of intermediated settlement or the use of a third party to mitigate against settlement risk. Although not setting out any clear guidance about how to distinguish between an 'abstract' and a 'tangible' idea in a claim, the court noted that intermediated settlement was a 'fundamental economic practice' that was 'long prevalent' in the US system of commerce, and that the use of a third-party intermediary (or 'clearing house') was a 'building block of the modern economy'. It appears that it is necessary (as a step wholly separate to considerations of novelty and inventive step) to look beyond the wording of the claim itself (ie to the patent specification and/or the prior art) in order to identify the 'concept' of the invention.

In regards to the second part of the methodology, the court noted that the claims merely required generic or conventional computer implementation, and that this was not enough to transform the abstract idea into a patent-eligible invention. The court paid particular attention to the claim features that were expressly directed to functions performed by a computer (such as creating and maintaining 'shadow' accounts, obtaining data, adjusting account balances, and issuing automated instructions), and noted that they were purely conventional. It was also significant that the computer-performed steps did not purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field.

We do not read the decision as representing a change in approach to the patenting of inventions involving software, although we believe that it confirms the position that it is very difficult to secure patent protection for a 'pure' business method, even if wholly implemented on a computer platform.

We believe that new developments in many fields of computer science (including things like natural language processing, cloud server optimisation, data analytics and telecommunications protocols) will continue to readily satisfy the threshold test set out in Alice Corporation. It is significant that such inventions generally reside in far more tangible fields than the financial transactions at issue in Alice Corporation. Moreover, the algorithms, data structures and hardware solutions that are devised to solve the challenging problems arising in these fields are anything but 'long prevalent' or 'conventional'.
 
We are currently awaiting the result of two decisions (Research Affiliates and RPL Central) of the Australian Full Federal Court, both of which are concerned with the patentability of computer-related inventions. It will be very interesting to see whether – and how – the Australian courts make reference to the Alice Corporation v CLS Bank decision.

1 comment:

  1. Risk management attempts to plan for and handle events that are uncertain in that they may or may actually occur. These are surprises. Some surprises are pleasant. We may plan an event for the public and it is so successful that twice as many people attend as we expected. A good turn-out is positive. However, if we have not planned for this possibility, we will not have resources available to meet the needs of these additional people in a timely manner and the positive can quickly turn into a negative.

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