The Supreme Court was very hot Court, with a lot of questions on the mind of the Justices. After reviewing the transcript I am left believing the Court is likely wondering whether it is possible to find the Alice patent claims to be patent ineligible while also ruling that software patent claims are not all patent ineligible. Surprisingly, it seemed as if Justice Scalia was most persuaded by the patent eligibility of the claims, directly saying at one point that the issues circling the case seem to really be about 102, not 101.
While I support the patent eligibility of the patent claims, particularly the patent claims drawn to a system, it seems undeniable that Alice missed many opportunities to score easy points. Indirect arguments were made by Alice that didn’t seem very persuasive. Indeed, if one is to predict the outcome of the case based on oral arguments alone it did not go well for Alice today. Only three things give Alice supporters hope after this oral argument as far as I can tell. First, the government seems to be asking the Supreme Court to overrule precedent in Bilski that is not even four years old, which simply isn’t going to happen. Second, the egregious overreach and outright misleading nature of the CLS Bank argument should raise a legitimate question or two in the mind of the Justices. Third, the reality simply is that at least the systems claims recite numerous specific, tangible elements such that it should be impossible to in any intellectually honest way find those claims to cover an abstract idea.
Of course, oral arguments are but one piece of the overall puzzle. By many accounts oral arguments are the least significant piece of the puzzle with many, if not most, Justices relying most heavily on the briefs. In fact, Justice Breyer specifically pointed out that he had read all of the amici briefs and found them quite helpful. Thus, it is really impossible to know how a Justice will decide based even on the questions asked during oral argument. After all, did anyone think the Chief Justice would rule in favor of Obamacare? But still, the way the oral argument went can’t make Alice and its allies feel particularly optimistic.
Alice Corporation Argument
Early on in the questioning Justice Kennedy asked a critical question and sheds important light on the claimed invention. Kennedy’s question was essentially this: Is there an invention or is what you are claiming so obvious that it could be created by anyone after the requirements were explained. The exchange between Justice Kennedy and Phillips went like this:
JUSTICE KENNEDY: Well, let me put it this way. If you describe that to a secondyear college class in engineering and said here’s here’s my idea, now you go home and you program over this weekend, my guess is my guess is that that would be fairly easy to program.
MR. PHILLIPS: I don’t disagree with it, Justice
JUSTICE KENNEDY: So the fact that the computer is involved, it it seems to me, is necessary to make it work. But the but the innovative aspect is certainly not in the creation of the program to make that work. All you’re talking about is if I can use the word an “idea.”
MR. PHILLIPS: I prefer not to use that word for obvious reasons.
This was preceded by Phillips attempting to explain the novelty associated with the computer applying rules that block an escrow transaction that would violate the terms of the settlement. This prompted Justice Breyer to seemingly take the first tangent, discussing King Tut handing out gold and using an abacus to keep track, or his mother taking his checkbook away when he tried to write too many checks. But at the end Breyer wrapped up these hypothetical fact patters asking: “So what is it here that’s less abstract that the computer says, stop?” Of course, not that Justice Breyer appreciates it, but his concern is about novelty, not patent eligibility.
Justice Sotomayor then chimed in. While the concerns of Justices Kennedy and Breyer were not directly couched in terms of novelty and obviousness, Justice Sotomayor essentially asked why the claims were patent eligible because they do not appear to be new, which directly and irresponsibly conflates 35 U.S.C. 101 with 35 U.S.C. 102, which up until Mayo v. Prometheus well established precedent of the Supreme Court forbade. Sotomayor said:
You used the word “function” earlier, and that’s all I’m seeing in this patent is the function of reconciling accounts, the function of making sure they’re paid on time. But in what particular way, other than saying do it through a computer, is this something new and not function?
The first friendly question for Phillips came from a very unlikely place — Justice Antonin Scalia. Scalia is famous in patent circles for calling patent law “gobbleydegook” during the KSR v. Teleflex oral arguments, and being the only Justice in Bilski to refuse to sign onto an opinion that would have found software patent eligible. Yet, Scalia asked:
[W]hy isn’t doing it through a computer not enough? I mean, was the cotton gin not an invention because it just means you’re doing through a machine what people used to do by hand? It’s not an invention.
Scalia then acknowledged that simply reciting a computer isn’t much, and that a computer alone may not impart novelty, but then saying “[b]ut that’s a novelty issue, isn’t it?” Phillips simply said “To be sure, Justice Scalia.” Then Justice Breyer took control of the oral argument again, bringing Phillips back to his King Tut hypothetical, of which he was obviously very proud. But Phillips did successfully turn this to one of his more effective returns, saying:
I think you can meaningfully look at this is to say that this is not simply something that was a fundamental truth, this is not something that simply says use a computer. It’s not simply something that says maintain solvency. It it operates in a much more specific and concrete environment where you’re dealing with a problem that’s been in existence since the 1970s, a solution in the 1990s, that CLS itself acknowledges needed a solution and came forward with their own solution that looks a lot like ours.
Justice Kagan entered the action with what I can only characterize as a bizarre set of questions that was very difficult to follow. At one point she asked Phillips, “putting the computer aside” what is the invention? This question is hard to fathom and shows a complete lack of familiarity with the law and the Supreme Court’s own precedent on point. The correct answer is you cannot put the computer aside because if you do then you are left with an abstract idea, as was the case in Bilski. It is the very presence of a specifically recited computer and other tangible structure that means the claims do not cover an abst4ract idea. Sadly, my explanation there is more direct and informative than the response from Phillips. Phillips instead explained:
[I]t’s difficult to do that because you absolutely need the computer in order to implement this. But the key to the invention is the notion of being able simultaneously, dealing with it on a chronological basis
to stop transactions that will otherwise interfere with the ability to settle on time and under the appropriate circumstances. And the only way you can do that in a realtime basis when you’re dealing with a global economy is to use a computer. It is necessary to the efficacy of this.
So in that sense, I can’t I can’t disaggregate it the way in some sense you’re suggesting. It seems to me it’s bound up with in it’s bounds up with the whole notion of is this an abstract concept.
The problem for Alice here is that Justice Kagan’s question demonstrated an acute lack of familiarity with the issues, law and relevant precedent. I’m afraid Phillips’ answer wasn’t particularly helpful. I mean even though I know what the right response should have been, and I think I know what Phillips was struggling to say, I can’t say I understand what Phillips actually said. How is someone as unfamiliar with the situation as Kagan going to deduce the answer?
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Even when Phillips was allowed to run with an argument it seemed he stumbled. When presumably trying to make the case that software has been around for a very long time and it would be inappropriate to judicially rule it patent ineligible he missed a golden opportunity. In fact, Phillips said “software patents [have been] in existence for well over a decade…” In truth, software patents have been around since 1968, which is two full generations. Similarly, Phillips tried to make the point that Congress has done nothing to prohibit software patents, he missed the opportunity to point out that Congress has specifically recognized the patent eligibility of computer-implemented methods (i.e., software) as recently as with the passage of the America Invents Act in 2011.
Ultimately, after much back and forth that seemed to achieve little useful, Justice Sotomayor asked Phillips which of the Federal Circuit opinions was closest to his own opinion of how the case should come out. Phillips identified the opinion of Judge Moore. This lead to the following exchange:
JUSTICE SOTOMAYOR: And if we were to think your method claim is ineligible, do you agree that your systems and your medium and system claims fail as well? Do they rise and fall together.
MR. PHILLIPS: No. No, I don’t believe they do rise and fall together… I think you could still say that the system claims, which clearly are — are how to create a computer system and how to implement it using that method, would be a much more concrete version of that in a way that would take it out of 101. That said, I, obviously, believe that all of our claims satisfy 101 and should go on to the next stage.
This response by Phillips is perfect to demonstrate why I am so frustrated. The answer is that the systems claims clearly and unambiguously recite specific tangible structure. So unless the Court is going to rule that a computer, databases and storage devices are imaginary there is no intellectually honest way to say that the systems claims cover an abstract idea. But rather than make a factual argument here he merely makes a generalized, rather non-informative statement. This is frustrating because throughout the argument when a legal explanation was best suited as a response Phillips would make a factual argument. But then here where a factual argument is best suited his response is non-specific.
Time and time again it seemed to me that Phillips was set up to score major point and he either missed the opportunity or made an argument so incomplete as to leave the wrong impression.
Unfortunately for Alice Corporation, Phillips never clearly and completely explained to Justice Kennedy, Justice Breyer or Justice Sotomayor why or how their questions were not on point and really spoke to different patentability questions not before the Court, despite being prodded to make that argument by Justice Scalia. Who knows, perhaps things would have gone just as poorly for Alice even if a good explanation were given because at least Justice Breyer seemed to think his novelty concern related somehow to the presence of an abstract idea. Still, it would have been nice for the point to be made and explanation provided that detailed why the concerns being voiced were unrelated to patent eligibility under 35 U.S.C. 101.
Instead, the argument of Phillips saw both Justice Kennedy and Justice Breyer probe whether it would be possible for the Court to rule that these claims are patent ineligible while not prohibiting the patent eligibility of software, as they were urged to do so by some of the amici filers. Unfortunately, Phillips did not explain that this is how software is claimed and that to find these claims patent ineligible would call into question if not directly invalidate virtually all software patent claims because they are all written similarly.
The rebuttal argument was more friendly to Phillips for several reasons. First, he was given time to actually explain himself. Second, the Solicitor General during his portion of the oral argument made the clear and unequivocal statement the he things “business patents” as he called them, are abstract and patent ineligible. This, however, would require the Supreme Court to overrule Bilski, which was decided only four years ago.
CLS Bank Argument
As I stated above, one of the only things that can give Alice hope is the egregious overreach and blatant misrepresentations embodied in the CLS Bank argument. At the beginning Mark A. Perry, who represented the Respondents, wasted little time before saying something so ridiculous it is hard to believe it was actually said. He started:
Bilski holds that a fundamental economic principle is an abstract idea and Mayo holds that running such a principle on a computer is, quote, “not a patentable application of that principle.” Those two propositions are sufficient to dispose of this case.
Mayo actually did not deal with computers, but rather dealt with a method of optimizing the therapeutic efficacy of a treatment. Second, in Bilski the Supreme Court, by the Court’s own direct acknowledgement, specifically made no broad, sweeping pronouncements about 101. In Bilski the Court merely held that the machine-or-transformation test is not the only test and was too restrictive, that business methods are patent eligible and that the claims were patent ineligible under the abstract idea doctrine. Notably, however, the Supreme Court did not say why or how the claims were abstract, just that they were, which is one of the major criticisms of Bilski. Thus, from the very beginning Perry was so inaccurate as to be practically intentionally misleading. It was terribly disappointing that the Supreme Court seemed so unfamiliar with their own precedent that Perry was not questioned at all on his extreme exaggeration. Instead, his first question was only after he was allowed to outline his entire argument, and it came from Justice Breyer and related to Archimedes.
Justice Sotomayor did, however, quickly focus in on a critical question, asking how Alice could have described the software so it could be patent eligible. Perry responded: “Justice Sotomayor, they have no software, first. They’ve never written software. They’ve never programmed a computer. So that’s a nonexistent set.” A skilled job of obfuscation really. But if the Supreme Court isn’t going to care, and Alice isn’t going to make the point, why should CLS Bank point out that that the way the Alice claims are written is the way that all software claims are written and any decision on these claims will necessarily implicate all software.
Interestingly, in an exchange with Justice Kennedy, Perry did say that an example of a patent eligible process would be “a computer running the particular data compression algorithm.” Frankly, I’m not sure how this helps CLS Bank unless the Supreme Court is going to continue to ignore Sections 102, 103 and 112, and instead make everything a question of patent eligibility under 101. But this seems to fit with the theory presented by Alice and most of the supportive amici. They believe these claims are patent ineligible because if you ignore the claims and look at the description of the invention there is no invention present, which really should be a 112 issue, or perhaps a 102/103/112 issue all together. To think that the Supreme Court may ignore the claims and perhaps even say that one needs to look past the claims would be unthinkable if you were dealing with a tribunal familiar with patent law and prosecution. The claims are the entire game, so to speak. Still, how a data compression algorithm would be patent eligible where these particular claims are patent ineligible is hard to see and is asking for a nuance the Supreme Court is likely incapable of making.
Chief Justice Roberts then asked an important question seemingly directed at the nonsensical argument that software is not patent eligible if it merely does something faster than a human, because after all software can do tasks that no human could ever live long enough to do. Roberts asked:
What if what if you can do it without a computer, but it’s going to take, you know, 20 people a hundred years? In other words, theoretically, you can replicate what the computer does but it’s impractical without looking to do it on the computer?
Perry largely dodged this impossible question for CLS Bank while at the same time seemingly giving a direct, forceful reply. He said that this case deals with a single transaction between two parties. He also said: “if what is being claimed is the necessary speed or efficiency or data crunching capabilities, if you will, of a computer, then it would have to be claimed, and there’s nothing claimed here.” Of course, this did not address the hypothetical raised by the Chief Justice, and also belies the fact that patent claims drawn to IBM’s Watson do not incorporate reference to speed or efficiency in data crunching. That he dodged caused Justice Breyer to enter the fray, and Breyer’s questions were similarly deflected as “fallacious.” This is significant because a ruling in favor of CLS Bank would likely mean that claims to Watson, which is truthfully the first generation of the Star Trek omnipotent computer, would be patent ineligible. Thus, it is easy to see why Perry engaged in oral argument judo to get away with not answering this troubling hypothetical.
Toward the end of Perry’s argument is the first time the Court circled back to take any issue with his mischaracterization of the precedent from Bilski and Mayo. Justice Ginsburg asked: “The Federal Circuit in this case split in many ways, and it had our decisions to deal with. You said, given Bilski and Mayo, this is an easy case. What is the instruction that escaped a good number of judges on the Federal Circuit?” Perry responded that “there’s a significant element to the Federal Circuit that disagrees with Mayo and has been resistant in applying it.” He went on to say that proof of this is the argument made in the amicus brief filed by Chief Judge Michel, formerly of the Federal Circuit.
How CLS will fare given the exaggerations and dodging of Perry remains to be seen. Will the Court know enough about the facts, law and their own precedent to pick up on the misdirection and mischaracterization? It is difficult to know.
The Solicitor General’s Argument
If I had to summarize the Solicitor General’s argument in one statement it would be this: Had the patent claims in Bilski included a computer and other tangible limitations the Court still would have ruled the claims to be patent ineligible. Essentially, the government seems to be making an argument based on the belief that Bilski was something that it was not and applying their own misinterpretation of the precedent to conclude that this case is really quite easy.
Solicitor General Verrilli explained:
And, of course, the holding in Bilski was that the the method for hedging risk was ineligible because it was an abstract idea, and I can’t imagine that if in Bilski the – the claim had been exactly the same but had added use a computer to carry out some of these standard random analysis functions that are claimed by the patent, that you would have found it to be patent eligible. And I — I would submit for the Court that the key point here, I think, is that now, given where the Court what the Court has held in Bilski, given what it’s held in Mayo, the abstract ideas exception is really the only tool left to deal with what I what I think I fairly read Bilski as problem, the proliferation of methods.
General Verrilli also dodged a question from Justice Ginsburg that asked him to address “the argument that your view would extinguish business-method patents and make all software ineligible for patent protection?” While he tried to respond to the software angle in the question he never responded directly regarding business methods, other than to say that he thought a fair reading of Bilski was that it would be quite rare for a business method to be patent eligible.
Of course, the fair reading of Bilski is that the Supreme Court said business methods are patent eligible. Thus, given General Verrilli’s arguments and the rather disingenuous brief filed by the government, it seems to me that it is the government’s position that that they don’t like Bilski and it should have been decided differently.
I am sometimes criticized as being an idealist, but I have to say that this oral argument was particularly disappointing. I expect better at the Supreme Court.
Regardless of the outcome oral arguments, and written arguments, should be informative and within the boundaries of fair representation. While Phillips missed many opportunities at least his argument was not disingenuous or based on reckless and unfair characterizations of the holdings of recent Supreme Court patentable subject matter cases. But is there enough here for Alice to prevail? That is a question we will have to wait on until sometime in June likely.
Regardless of what the Supreme Court ultimately rules, the factual truth is that the Alice claims, particularly the system claims, do not cover something that is abstract simply because there are many tangible elements recited. See Patent Twilight Zone. If the Supreme Court does ultimately rule that these claims, particularly the system claims, cover abstract ideas then all software patent claims will be unnecessarily challenged regardless of substance of the innovation because software patent claims are structured identically to the claims present in this case. Furthermore, if things that are objectively and clearly tangible are decreed by the Supreme Court to be abstract ideas then where will the line be drawn? Everything would run the risk of being patent ineligible. Of course, these points were never made by Phillips, which is truly unfortunate and rather depressing.