Federal Circuit To Rehear Abstract Financial Software Patent Case En Banc

October 10, 2012, by Mandour & Associates, APC

Los Angeles – The Federal Circuit said Tuesday it will convene a full en banc panel of its judges to reconsider a hotly contested three-judge panel July ruling of the appeals court upholding four financial software patents, for which the court has come under assault for allowing a too-abstract idea to receive patent protection.

On rehearing, the appeals court directed appellant Alice Corp. and CLS Bank International, which sued Alice for a declaratory judgment that its patents were invalid and unenforceable, to file additional briefs on what test the court should adopt to determine whether a computer-implemented invention is a patent ineligible abstract idea, and when, if ever, the presence of a computer in a claim lends patent eligibility to an otherwise patent-ineligible idea.

The Federal Circuit also requested more briefing on the question of whether, in assessing the patent eligibility of a computer-implemented invention, it should matter whether the invention is claimed as a method, system, or storage medium, and whether such claims should at times be considered equivalent for Section 101 purposes.

The 2-1 panel ruling in July reversed a lower court’s summary judgment order invalidating Alice’s U.S. Patent Numbers 5,970,479, 6,912,510, 7,149,720 and 7,725,375.

The majority opinion, authored by Circuit Judge Richard Linn and joined by Circuit Judge Kathleen O’Malley, held that the patents’ system, method, and media claims at issue are not drawn to mere abstract ideas but rather are directed to practical applications of invention falling within the categories of patent eligible subject matter.

The patents cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.” Settlement risk is the risk that only one party’s obligation will be paid, leaving the other party without its principal.

The July ruling set off panic in the technology sector over the patentability of abstract concepts that do not specify how to put a given invention into practice. Industry players including Google Inc., Twitter, Hewlett-Packard and Red Hat filed an amicus brief with the appeals court in support of rehearing, as did the Electronic Frontier Foundation.

The Federal Circuit panel’s majority opinion came hand in hand with a sharply worded dissent from Circuit Judge Sharon Prost.

“The majority resists the Supreme Court’s unanimous directive to apply the patentable subject matter test with more vigor,” she said. “Worse yet, it creates an entirely new framework that in effect allows courts to avoid evaluating patent eligibility under Section 101 whenever they so desire.”