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June 1, 2023
John Rizvi, Esq.

Alice v. CLS Bank Software Patent Supreme Court Case Summary

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Hi, I'm John Rizvi, the patent professor. I teach patent law to students and other attorneys as an adjunct professor at NOVA Law School. I'm known as the patent professor. I have a lot of experience in software patents, and I'm board certified as an expert in patent law. Today I'm going to teach you about an important Supreme Court case dealing with software patents. In 2014, the Supreme Court heard the case of Alice Corporation versus CLS bank. Alice Corporation filed a series of patents starting in 1999 for an alleged computer system that was intended to automate settlement risk. Settlement risk is the idea that only one party to a financial agreement may perform the duty imposed by a financial agreement. The solution to this is the escrow system, which is a concept that has been used in financial circles for hundreds of years. The problem is that none of the Alice patents featured working source code. Nor did Alice Corp ever create a fully functioning prototype of the computer system alleged in the patent documents. Meanwhile, the CLS thinking Corporation build an actual computer that did what Alice's patents only claimed it could do, complete with source code and an operational model. This system process trillions of dollars and transactions every day. In 2007, CLS bank sued Alice Corporation, stating that the patents were invalid. Alice countersued alleging the patents were valid, and that CLS had infringed them. The lower court agreed with CLS stating that abstract concepts such as escrow cannot be patented. Alice appealed the decision and the appellate court ruled analysis favor, but the federal court vacated the ruling. Taking the case into Federal Circuit Court. The Federal Circuit Court cannot agree on whether the escrow concept was a patentable concept, simply because of the addition of a computer. Science escrow and computers are not natural phenomena or acts which can't be patented either. Those criteria didn't fit. Finally, the Ellis case came to the Supreme Court. The Supreme Court ruled that because the claims are drawn to a patent ineligible abstract idea, they cannot be patented. In short, Alice's patents were no good. The problem is that the Alice decision gave very little guidance regarding what kinds of software is patentable. While it said what is not eligible to patent? The court did not indicate in what circumstances the system would be considered eligible. This doesn't mean that all software is immune from being patented. Just because Alice's patents were ruled to be bad. Does that mean that your software or source code does not show true innovation? That is protectable. Work with me, the patent professor and maximize the chances that your software patent doesn't fall down the rabbit hole like Alice did.

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At the law offices of John Rizvi, P.A. - The Idea Attorneys®, we have dedicated our practice exclusively to securing and preserving the intellectual property rights of our clients, including patent, trademark, copyright, trade secret, unfair competition, and franchising matters.
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