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Alice Corp. v. CLC Bank Int’l: Notable Quotes from the Oral Arguments.

Posted in Litigation Commentary by Kristen Fries on April 18, 2014

The link to the transcript for the March 31, 2014 oral arguments before the SCOTUS in Alice Corp. v CLC Int’l can be found here.

Background: Alice Corporation, petitioner, owns the four patents-in-suits which are directed toward a computerized trading platform for the execution of a previously agreed-upon exchange, known as “settlement.” The inventions include electronically maintained accounts for each party in the settlement and after receiving transactions from each party, the computer system effects the exchange. The United States District Court for the District of Columbia declared each of Alice’s patents invalid for not defining patent-eligible subject matter. The U.S Court of Appeals for the Federal Circuit affirmed the decisions, in an en banc rehearing.

Issue: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Per usual, we will preface our thoughts with the following disclaimer:  “It is generally a futile effort to predict how the Supreme Court will rule on any given issue.”  That being said, below are some quotes that we found of particular interest:

Transcript at page 4.

JUSTICE GINSBERG: Mr. Phillips, on the abstract idea, you know that the Bilski case held that hedging qualified as an abstract idea. So how is intermediate settlement a less abstract than hedging?

Transcript at page 5.

JUSTICE KENNEDY: So the fact that the computer is involved, 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.

Transcript at page 6.

JUSTICE BREYER:  Why is that less abstract? I mean, imagine King Tut sitting in front of the pyramid where all his gold is stored, and he has the habit of giving chits away.  Good for the gold, which is given at the end of the day.  And he hires a man with an abacus, and when the abacus keeping track sees that he’s given away more gold than he is in storage, he says, stop. You see? Or my mother, who used to look at my checkbook, when she saw that, in fact, I had written more checks than I had in the e account, she would grab it.  Stop.  You see? So what is it here that’s less abstract that the computer says, stop?

Transcript at page 7-8.

 MR. PHILLIPS:  No.  Well, I mean, again, it seems to me that in some ways what – ­­what you described there is a caricature of what this invention is

JUSTICE BREYER:  Of course it’s a caricature.  It’s a caricature designed to suggest that there is an abstract idea here.  It’s called solvency.


JUSTICE BREYER:  And what you do is you take the idea of solvency and you say apply it.  And you say apply it through the computer. Is that enough to make it not just the abstract idea?  And now we’re at the heart of why I used my exaggerated examples.

Transcript at page 9.

JUSTICE SCALIA:  Why isn’t it ­­ why 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.  It’s the same old, same old.

Transcript at page 18.

JUSTICE SCALIA: By the way, we ­­ we have said that you can’t take an abstract idea and then say use a computer to implement it.  But we haven’t said that you can’t take an abstract idea and then say here is how you use a computer to implement it.­­

MR. PHILLIPS:  Exactly.

Transcript at page 29-30.

JUSTICE SOTOMAYOR: How could they, if at all, written their patents to ­­ to make ­­to make their software eligible?  What would ­­- what do they need would have needed to have added?

MR. PERRY:  Justice Sotomayor, they have no software, first. They’ve never written software. They’ve never programmed a computer. So that’s a nonexistent set. Second, there are many technological solutions to trading and settlement problems.  For example, data compression.  These ­­ these trading platforms involve the movement of very large quantities of data around the world.  The physical pipes, that is, the fiber optic cables and data lines are limited.  There are very sophisticated algorithms for both security and speed to move data through the transmission lines in novel and useful ways that could well be patented. Nothing like that is claimed here.

Transcript at page 37-38.

 MR. PERRY:  Mr. Chief Justice, first, these claims literally read, as Alice reads them, on a single transaction between two parties, so it’s not 20 people for a hundred years.  It’s one person sitting in a room, so that’s not a problem. Second, 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. All that is claimed ­­and my friend is going to stand up on rebuttal and tell you all that the expert said, well, what is claimed is a computer, but it’s just a computer. It just says a computer configured to.  It doesn’t say that the computer actually has to­.

JUSTICE BREYER:  Yeah, but the trouble with that particular test is, as I think partly the Chief Justice said, how long, et cetera, and then add to that, though you could do it without a computer, what happens at the end of the line is the automobile engine goes off or it begins to sputter or it turns left.

Transcript at page 39.

JUSTICE KAGAN:  Mr. Perry, before we get back to these matters, you said to Justice Scalia if a patent sufficiently describes how a computer will implement an idea then it’s patentable.  So how sufficiently does one have to describe it? What do we want a judge to do at this threshold level in terms of trying to figure out whether the description is sufficient to get you past it?

MR. PERRY:  If I can answer in two steps, Justice Kagan.  First in the negative: What the applicant or patentee must do ­­must not do is simply describe the desired result. That would take us back to State Street.  That would simply say: I claim a magic box that buys high and sells low or vice versa, I suppose, I claim a magic box for investing.  That’s what these patents do. Then to put it in the affirmative and in the language of Mayo, the claim has to recite something significantly more, something significantly more than the abstract idea itself.  That would be a contextual analysis based on the claims and specifications and file history, and we know that some devices, some methods, same programming will pass that.

Transcript at page 51.

CHIEF JUSTICE ROBERTS:  General,­­ you mentioned a while ago the need for greater clarity and certainty in this area. And I’m just wondering, in your brief, you’ve got a non­exhaustive of factors to consider, and there are 6 different ones.  And I’m just doubtful that that’s going to bring about greater clarity and certainty.

GENERAL VERRILLI:  I take -­­ I take the point, Mr. Chief Justice, but I think the key is that they are all directed to answering the question of whether the innovation that is claimed and is an innovation in either, A, the improvement of a computer’s functioning or, B, the use of computer technology to improve the functioning of another technological process, and a case like Diehr would be in the latter category.

Transcript at page 53.

JUSTICE GINSBURG:  I have a question about how do you identify an abstract concept.  The natural phenomenon, a mathematical formula, those are easy to identify, but there has been some confusion on what qualifies as an abstract concept.

GENERAL VERRILLI:  We would define abstract -an abstract concept as a claim that is not diected to a concrete innovation in technology, science, or the industrial arts.  So it’s the ­­ it’s abstract in the sense that it is not a concrete innovation the traditional realm of patent law.

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