By Erin Geiger Smith
Feb 8 (Reuters) - The U.S. Court of Appeals for the Federal
Circuit, sitting en banc, will hear arguments Friday over
whether a computer-assisted business method that reduces risks
in financial transactions deserves patent protection or if it's
an "abstract" idea that is ineligible to be patented.
The case is being closely watched by Google Inc, Facebook
Inc and other technology companies because it could determine
how far the patent system can go in protecting software
CLS Bank International, which runs a foreign-exchange
settlement system, is seeking to convince the Washington court's
nine judges that financial markets technology company Alice
Corp's patents represent abstract ideas and are thus invalid.
CLS is represented by attorneys at Gibson Dunn & Crutcher,
led by Mark Perry. Adam Perlman of Williams & Connolly will
argue for Alice, whose team also includes attorneys from Sidley
Austin and Sterne, Kessler, Goldstein & Fox.
Alice, which is owned in part by National Australia Bank
Ltd, holds a portfolio of patents, including four that cover a
computerized system for exchanging financial obligations. The
company argues that when an invention requires the use of a
computer, even if it involves an abstract idea, "it's patentable
if the computer plays a significant role in the invention."
A federal court in Washington sided with CLS, but in July
2012 a three-judge panel of the Federal Circuit overruled that
decision, finding the methods were unique and could be patented.
It was a divided panel, however, and dissenting Judge Sharon
Prost criticized the majority for flouting the Supreme Court's
directive in recent cases to be more discriminating in deciding
what can be patented.
"Just a few months ago, the Supreme Court reversed us in a
(patent eligibility) case for a second time in its last three
terms, hinting (not so tacitly) that our subject matter
patentability test is not sufficiently exacting," Prost wrote.
CLS, which originally brought the case in 2007, has argued
that Alice's patents seek to monopolize an idea that's long been
a part of financial transactions.
"Computer-implemented methods are important to the economy,
and we hope this case can shed some light" on the law in the
area, Gibson Dunn's Perry said in an interview.
An attorney for Alice declined to comment, citing the
Google, Dell Inc and Facebook, represented by King &
Spalding, filed a friend-of-the-court brief criticizing the
appeals panel's earlier decision.
They wrote that "bare-bones patents" like Alice's do not
innovate enough on their own to deserve protection. "The real
work comes later, when others undertake the innovative task of
developing concrete applications," they wrote.
LINKEDIN, TWITTER, IBM
LinkedIn Corp, Twitter Inc and others also submitted a
friend-of-the-court brief, arguing against too much leniency in
granting patents, though they did not pledge support for either
side in the case.
International Business Machines Corp, on the other hand,
filed a brief saying most software inventions qualify for patent
protection. IBM, which has topped the list of U.S. patent
recipients for 20 years, cautioned the court against creating a
strict rule that would further limit protection, though it did
not side with either party in the lawsuit. Paul Clement of
Bancroft, as well as in-house counsel for IBM, filed that brief.
John Vandenberg, an attorney at the law firm Klarquist
Sparkman, who filed the Twitter group's brief, said the case is
being highly watched both because of the division within the
Federal Circuit itself on the issue of patentability, especially
in the e-commerce and computer-implemented invention field, and
because of the obvious disagreement between the appeals court
and the Supreme Court.
"The Supreme Court has more interesting things to do than
worry about patents," he said, "and yet they have taken three
cases in the last five years on patent eligibility."
Further, Vanderberg said, if the Federal Circuit, or
eventually the Supreme Court, finds in favor of CLS, it could
allow judges to dismiss a case soon after it is filed if they
determines the patent at issue covers an abstract idea.
In Bilski v. Kappos, the Supreme Court found in 2010 that a
business-method patent for guarding against investment risk was
an abstract idea and could not be patented. Last March, in Mayo
v. Prometheus, the court ruled that a company could not patent a
diagnostic process involving blood tests because observations
about natural phenomena cannot be protected.
The third case, the Association for Molecular Pathology v.
Myriad Genetics Inc, will be heard by the Supreme Court sometime
this term, though an argument date has not been set.
The case is CLS Bank International v. Alice Corporation Pty
Ltd, U.S. Court of Appeals for the Federal Circuit, No. 11-1301.
For CLS: Mark Perry of Gibson Dunn & Crutcher.
For Alice: Bruce Genderson of Williams & Connolly.
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