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Groklaw's Report from the CLS Bank v. Alice En Banc Hearing at the Federal Circuit ~pj Updated
Friday, February 08 2013 @ 06:46 PM EST

I hope you were not expecting too much from today's en banc hearing by the Federal Circuit on CLS Bank v. Alice. A split decision is the best we can hope for, according to Bloomberg's report on the day's festivities, Google Joins JPMorgan in Seeking Software Patent Limits, quoting a patent lawyer, Brad Wright:
Based on their questions and their past rulings, the judges seemed divided, said Brad Wright, a patent lawyer with Banner & Witcoff in Washington who attended the hearing. “The court appears fractured and a split decision is likely,” Wright said.
Fractured. Indeed. Le mot juste. A split decision is what Mark Lemley predicted, as well.

I have collected a couple of other reports on the hearing, and then we have our own. Ours is hilarious, in the way that only geek pain plus indignation plus despair plus a touch of amazement at tech cluelessness can provide.

Yes. Another 'is software patentable' case. Or is this patent so blazingly obvious it is invalid? If so, how about if the patent claims the magic happens when folks do it "using a computer"?

First from ItWorld:

Still, when U.S. Patent and Trademark Office (USPTO) lawyer Nathan Kelley argued Friday that simply using a reconfigured computer to run an abstract idea doesn't make it patentable, Judge Kimberly Moore suggested that all software basically reconfigures a computer.

Alice's patents describe specific ways a computer is configured to run the company's trading platform, and contain detailed flow charts describing the process, Moore said. The Alice patents are "so far" from an abstract idea, she said.

"What you effectively said is software patents are dead," she said to Kelley.

Kelley disagreed, saying the USPTO's argument was more narrowly focused on abstract ideas and whether adding a computer process to them should be patentable.

And the Legal Times tells us:
Judge Pauline Newman questioned Perry on the definition of abstract. He responded by saying that it's something that can be done "entirely in the human mind or made with pen and paper." Using a computer to accelerate this process does not make the method unique, it simply accelerates the process. "In this context, a computer is a neutral," Perry said.

Nathan Kelley, the deputy solicitor for the U.S. Patent and Trademark Office, supported Perry's claims.

"We reject the notion that a general purpose computer and software would never be eligible for a patent," Kelley told the judges. "Adding a general purpose to an abstract idea is not a claim."

We had our own reporter in the room, Webster Knight, a geek and an attorney. Here's his take:

Preface:

PJ has sent out the order. Go to the Federal Circuit for the en banc oral argument of CLS Bank v Alice Corporation. This is a Biggie for software patent haters, right up there with Bilski. This adventure will shorten the usual commute, one of the most wondrous a dutiful worker could have. If he eschews the speed and risks of the subway, as he often does, he can take the express bus down embassy row to Dupont Circle, then cross downtown on H Street to Madison Place on Lafayette Square situs of the Federal Circuit and the White House. If the commuter is a little early, he can sit on a bench and contemplate which of the statues is Lafayette. If it is not the one in the middle, It will be reported here. [It was Jackson in the rain.]

History:

The procedural history starts with a suit by Alice Corporation against CLS Bank for violating its patents that involve a computerized trading platform for exchanging obligations so as to eliminate “settlement risk.” This can be used for trading stock and commodities. Such products and practices have centuries of precedent. They are not new or inventive, but they invoked a computer and impressed the USPTO. The District Court, in a summary judgment, invalidated the patents as abstract ideas under Section 101, ineligible for a patent. The Federal Circuit reversed, so now CLS is asking the Circuit en banc to reinstate the District Court summary judgment.

The petition en banc was granted because they had to. The dissent by Judge Sharon Prost invoked the panel's disregard of the Supreme Court precedents in an extended and authoritative manner. She also accused the majority of creating a new category for patentability without specifying a test or basis. These issues have become the basis of a duel with the Supreme Court. With Judge Prost's dissent aiming this case at the Supreme Court, the Court en banc has to deal with it now or after a likely remand on the very issues Prost called them out on. The Order granting the petition called for the following:

a. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible "abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?; and

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

The fox does not want to leave the henhouse and neither do the roosters. The Federal Circuit loves patents and perceives innovation where it may not exist. There are some among them who love computer instruction patents. They use the word "software" unabashedly.

In the Room:

The Bosch v. Pylon argument was scheduled first so the en banc panel initially laid out was to change for Alice, however the Alice dissenter, Prost, sat next to her majority rival, Kathleeen M. O'Malley. The author of the discarded Alice decision, Judge Richard Linn was not present. The Circuit's issue with the Supreme Court is also an issue amongst themselves. Who favored a bright line standard for patenting that was easy to follow? Who would hang tough against the Supreme Court and their colleagues? The Circuit appears not to make the standard too bright or easy to follow lest there be fewer patents and their services not be needed. But how long can they snub the Supreme Court? They had better do something clear and decisive with this case or ...

Bosch v. Pylon Goes First:

The first case, Bosch v. Pylon should have been argued second. Bosch had patents on wiper blades. They asked for an injunction and were denied. Bosch appealed to the Federal Circuit which reversed the District court, presumed irreparable damages and ordered the permanent injunction. Talk about loving patents! After all of this, someone in the Circuit itself said, "Wait a minute. Do we have jurisdiction yet? The judgment was not final save for an accounting." So they stopped themselves and ordered an en banc review sua sponte. It should have been second because it was somniferous with the issues being the definitions of "an accounting" over the centuries -- and something else about willful infringement. There was not a word about wiper blade design, sadly.

As announced by Chief Judge Randall R. Rader, there was a break for the en banc panel to be reconstituted, with more and different judges as it turned out. In the men's room an arguing attorney from each side shouted his priority for use of a facility and cut the line. All deferred.

CLS v. Bank:

Back in the courtroom one immediately noted that there was an additional tenth seat. How would they break a tie? Seated on the left was the original panel with Judge Richard Linn who wrote for the majority, Judge Sharon Prost of the (winning) dissent, and Judge Kathleen M. O'Malley, the rest of the majority.

The opening argument: Attorney Mark Cronin for CLS Bank held that the patent should have been invalidated because it was too abstract. An abstract idea was one that was purely mental. The banking transactions covered by the patent existed before the patent and consisted of mental steps.

The argument was spectacularly interrupted by the twelfth judge of the Court, Judge Kimberly A. Moore. "How can this not be patentable? Look at these long elaborate flow charts! Look at this list of hardware specifications: controllers, a Unix Sparc Station, data storage, connectors ...!" She was whole-hog into the patentability of the technology. It is too vast and complex not to be. It is hard to call her clueless when she is one of the ones who makes the clues. She repeated this several times throughout. At one point the lights flickered inducing one of her many, witty quips about a "Super Bowl" moment and the subsequent near-collapse of the Ravens. After reassuring all of her affections for the Ravens, and not even excluding retiring linebackers, she moved on in support of patents. She interrupted long and often. Judges Linn and O'Malley entered the discussion on the side of patentability and their earlier decision. Judge Prost entered a little at the end but certainly did no "set-up" questioning to emphasize her position in her dissent. About four judges seem to reveal themselves for each side leaving two indecipherables, Chief Judge Rader and the eldest, Judge Pauline Newman. [PJ: However their record speaks for itself. And another attorney who was in the peanut gallery today (the courtroom was packed) tells me that Judge Rader didn't ask a single substantive question, which may mean, "given his expansive view of patent eligible subject matter, he may just have already made his mind up." He says Judge Moore at one point compared *herself* to the Ravens in the Super Bowl.]

One judge noted that house settlements could be done in the way of this patent. This claim pre-empted the field of secure transactions. This was rebutted by the argument that it is patentable but ruled out for obviousness under sections 102 and 103.

Next up was Nathan Kelly for the United States Patent Office who was invited to participate by the Court. He said a bright line test was not workable, but that a computer plus an abstraction did not make for a patentable invention. He, as everyone else, did not want to say that that computer instructions should not be patentable. He just says that it should not be patentable "in this case."

Judge Moore struck loudly as he was mentioning the Alappat case, "Didn't you just say software patents are dead?" She repeated it and repeated her marvel of the machine specifications and flow charts.

Now and then, there is a dramatic, telling moment in a courtroom that betrays a significance beyond the words in exchange. Judge Timothy Dyk entered the discussion with Mr. Cronin and asked if the patented settlement methods were valid without a machine. The response in favor of the patents was that using shadow accounts was one method to secure transactions used in their patent. There were other particular ways. Judge Dyk said that the patent was an "end of day netting" method. The response was a defensive "this is our patent from 1993 that we have improved."

Judge Dyk then asked if there was a way to do "end of day netting" transactions without using the patents. The lawyer for Alice, Adam Perlman, refused to answer. He said he did not want to answer that question. There was a pause and there was silence. This clearly fell on an issue of pre-emption discussed at another time. The lawyer couldn't answer since to admit of another method would show a dodge of their patents, and to say there was no other method would confirm pre-emption of an accounting method that predated computers. It was a touché moment.

What type of claim has to be made for an invention "with a computer?" Judge O'Malley noted that the computer could calculate, store and print. The shadow accounts were used by the computer. It is complex. It must be patentable. Mr. Cronin ended with the presumption of validity of duly issued patents.

Mr. Perry was given his rebuttal time. Judge Prost finally entered the discussion. Judge Linn got in that it was an "inventive concept." And as Perry was concluding with his ace referral to Bilski, Judge Moore re-entered the discussion to note that the patents should be evaluated claim by claim.

Conclusion: Expect them to give some lip service to the Supreme Court precedents like Bilski and Mayo but surely they will uphold the patent.

I'll add more media coverage as I come across it, if it adds anything new. But I liked this touch from Grant Gross's account at ITWorld:
Patents should be reserved for real inventions, not just general ideas, Perry countered. Some people have thought that self-driving cars would be useful, but Google is the company that finally spent the money to create the invention, he said. Google should be able to get a patent on a self-driving car, not a person who thought of a self-driving car without designing one, he added.

"There are companies that spend tremendous assets -- money, time -- to develop real things," he said.

Some background, for any who are new to the case:

And here's Groklaw's collection of articles on software patents, where we've tried to explain to non-geeks what software actually is and why it should not be patent eligible subject matter. Note there is a difference between limiting software patents and outlawing them.

From Bloomberg's account, there is this:

International Business Machines Corp., which has received the most U.S. patents for the past 20 years, and a lobbying group whose members include Microsoft Corp. and Apple Inc., said software needs legal protection because it contributes to the nation’s economy.
I don't believe that. Software contributes, beyond a doubt. But software patents do not, from all the evidence I've seen. On Google's side also were British Airways, Intuit Inc., Twitter Inc., Yelp Inc. and SAP AG. And Dell and Facebook, according to Reuters. Here's Google et al's amicus brief, and the full list is Google, Dell, Facebook, Homeaway, Intuit, Rackspace, Red Hat and Zynga.

Here is a list of all the judges on the Federal Circuit Court of Appeals.

Update: Here is the mp3 of the oral argument in CLS Bank v. Alice, and if you are interested in the wiper blades case, despite Webster's description, you can find it here.


  


Groklaw's Report from the CLS Bank v. Alice En Banc Hearing at the Federal Circuit ~pj Updated | 267 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
I have to wonder....
Authored by: Anonymous on Friday, February 08 2013 @ 06:59 PM EST

If USPTO Lawyer Nathan Kelly truly believes that:

    abstract is something that can be done entirely in the human mind or with pencil and paper
then I have to wonder what kind of software Kelly envisions could not be done by human mind with pencil and paper.

RAS

[ Reply to This | # ]

Thanks Webster!
Authored by: Anonymous on Friday, February 08 2013 @ 07:07 PM EST

Still enjoy your particular style of authorship.

Thanks for taking the time to put in an appearance and report.

RAS

[ Reply to This | # ]

Some progress
Authored by: Anonymous on Friday, February 08 2013 @ 07:18 PM EST
At least *one* Federal Circuit judge is listening to the Supreme Court's rulings
on the limitations of patents.

MSS2

[ Reply to This | # ]

Washington - such a beautiful city
Authored by: Anonymous on Friday, February 08 2013 @ 07:37 PM EST

Been there many times.

As to the court, they have a vested interest in Patents. So don't expect anything. The big question is will this be appealed to the top, and if it is, will the Supreme Court take it up.

Wayne
http://madhatter.ca

[ Reply to This | # ]

Arrrrrrrrrrrrrrrgggg!!!
Authored by: jvillain on Friday, February 08 2013 @ 08:25 PM EST
Alice's patents describe specific ways a computer is configured to run the company's trading platform, and contain detailed flow charts describing the process, Moore said. The Alice patents are "so far" from an abstract idea, she said.

This is the stupidest thing I have ever read on Groklaw and believe me SCO's lawyers and witnesses said some truly stupid things.

Flow charts? "Take a number" -> "Add a number" -> "Get answer"

Please send my patent for addition to my home address.

Reconfigures the computer? FAIL. First I really doubt she is about to describe is "reconfiguring" the computer. Even if it did what are the odds that their software reconfigures it rather than a library some one wrote or the BIOS or drivers all with their own patents and copyrights? Oh their software calls those libraries? Using the API or ABI that the libraries provide right?

[ Reply to This | # ]

Software patents
Authored by: Gringo_ on Friday, February 08 2013 @ 08:50 PM EST

In the previous topic, "Judge Robart in Seattle Grants Microsoft's Motion for Partial Summary Judgment", I have just added a comment at the bottom of the page dissecting the judge's ruling. The ruling involved an arcane subject, and it is likely few would understand the implications of the judge's ruling. I think my comment may be a contribution overall to the debate so I wanted bring it to the attention of other Groklaw members who have been involved in developing or critiquing Groklaw's official stand on software patents.

[ Reply to This | # ]

Being complex does not make it patentable
Authored by: Anonymous on Friday, February 08 2013 @ 09:37 PM EST
Most here will agree that software is maths but everyone should agree that an
algorithm is maths.

We have also heard some judges believe that an algorithm needs to be disclosed
for the patent to be valid.

Sadly, anyone can spend some effort and draw a flow chart defining an existing
bank process of calculating payments and keeping track of a mortgage taking
repayment risks into account. Something that has occurred manually for eons.
Such a flow chart can be very complex and may have required considerable effort,
but nothing has been invented, only documented.

What i fail to understand is how is it that by spending this effort to draw the
flow chart and adding some nice words to a patent documents, suddenly a patent
is granted on a bank managing a mortgage. Then a judge comes along with a
presumption that a patent is always valid and makes statements that effort =
invention.

Effort and timing can = a successful product but does not automatically equate
to an invention. If our legal eagles believe that effort always = invention, the
game is lost.

Also i don't believe anybody got a patent for the concept of a motorized vehicle
and in the same way, nobody should get a patent for a driver-less motorized
vehicle, regardless of the effort they spend developing one. They can possibly
apply for patents on individual components which they integrate but not on the
whole. But even then, for example, much of the vision detection system and their
mathematical algorithms already exist and have existed for years and years. The
very low computational power of older computers would result in vision detection
product being priced out of the market before one begins.

Locking up a complete industry because someone has spent some effort integrating
maths into now rather capable computers, resulting in a cost effective manner,
is not an invention, it's just good market timing based on well priced building
blocks.

But again the mantra we have seen in this En Banc that effort = innovation
doesn't inspire any confidence in the law.

[ Reply to This | # ]

Hey Judge Moore! Check this out!
Authored by: SpaceLifeForm on Friday, February 08 2013 @ 11:33 PM EST
Oh sorry, it is gone now.

It was a really bright cloud that looked
like it had a Ravens logo on it!

It was really cool looking. I know you
would have been impressed. Oh well, at least
you have those really cool flowcharts. They
must be awesome, cooler than any of my flowcharts,
I'm sure.

If I find a really shiny rock, I'll let you know,
especially if it looks like a Raven.

Have a nice day!

"Only a few find the way;
some don't recognize it when they do;
some don't ever want to."


---

You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

Off Topic
Authored by: Gringo_ on Friday, February 08 2013 @ 11:41 PM EST

[ Reply to This | # ]

Groklaw's Report from the CLS Bank v. Alice En Banc Hearing at the Federal Circuit ~pj
Authored by: Anonymous on Saturday, February 09 2013 @ 03:28 AM EST
The whole thing goes off the rails from the moment the circuit granted the
appeal including the question

"when, if ever, does the presence of a computer in a claim lend patent
eligibility to an otherwise patent-ineligible idea?"

Um, NEVER.

[ Reply to This | # ]

He refused to answer a Judge!
Authored by: amster69 on Saturday, February 09 2013 @ 04:37 AM EST
Judge Dyk then asked if there was a way to do "end of day netting"
transactions without using the patents. The lawyer for Alice, Adam Perlman,
refused to answer. He said he did not want to answer that question.

He can do that? Just plain refuse? What a system!

---
Bob

[ Reply to This | # ]

News Picks
Authored by: complex_number on Saturday, February 09 2013 @ 05:34 AM EST
Don't forget to reference the item in question


---
Ubuntu & 'apt-get' are not the answer to Life, The Universe & Everything which
is of course, "42" or is it 1.618?

[ Reply to This | # ]

a person who thought of a XXX without designing one
Authored by: IMANAL_TOO on Saturday, February 09 2013 @ 05:35 AM EST
How is this related to science fiction and all the awesome ideas blurted
incessantly by some authors, who may not have the time, incentive and money to
make it into a semi-working prototype?

How close do you need to be the real McCoy to make it patentable?



---
______
IMANAL


.

[ Reply to This | # ]

Abstract ideas, and computer implementations
Authored by: macliam on Saturday, February 09 2013 @ 06:44 AM EST
A salient point to bear in mind is that there are no recognized exceptions to
patentability for mathematics as such, or software as such, or business
processes as such. The usual exceptions are judicially created by Supreme Court
decisions going back about 150 years, and are recognized for laws of nature,
natural phenomena (or products?), and abstract ideas.

In Bilski v. Kappos, the Supreme Court declined to create an exception for
business processes as such. In so far as mathematics is excluded from
patentability, it is on the grounds of being an abstract idea. But case law
would need to develop the extent of this exception.

What is an abstract idea? If one accepted Berkeley, then the exception is a
dead letter, because, according to him, there is no such thing as an abstract
idea. My understanding (of the original meaning, and as discussed by
philosophers) is that an abstract idea is an idea abstracted from ideas or real
world phenomena and situations that constitute instances of that idea. The idea
would thus be arrived at through a process of abstraction, in much the same was
as an abstract or synopsis is abstracted from an academic paper or legal
opionion. Pace Berkeley, a triangle is an abstract idea that is abstracted from
numerous instances of geometric figures, such as might be drawn on the sand, or
occurring as architectural features, etc. In mathematics, the abstract idea of
a group is abstracted from various algebraic structures with the common property
that the structure includes a binary operation that is associative and has an
identity element and inverses. A mathematical formula suggesting near optimal
curing times for rubber would be abstracted from observations of natural
phenomena that occur during the curing process. Similarly a method of computing
an alarm limit in processes involving catalytic conversion would be an
abstraction from observations of potential dangers or breakdowns in industrial
processes.

One could argue that if a PHOSITA, or a person with capabilities that are not
exceptional (e.g.,photographic memory) can hold an idea in her mind, and
implement it, using at most pencil and paper to record intermediate steps and
calculations, and especially if that idea can be described in textbooks and
taught to students as a method that can be practiced using at most pencil and
paper, then it almost certainly qualifies as an abstract idea. Surely the
shadow transactions of the Alice patent, where the true accounts are balanced at
the end of the working day, are manifestations of an abstract idea.

One might ponder as to whether or not software performing the encoding and
decoding of images at issue in the Microsoft v. Motorola case discussed in the
previous Groklaw article on Judge Robart's ruling are abstract ideas in the
above sense.

But if one has a patent that claims a computer-implemented invention based on an
abstract idea (in the above sense) the decision in Mayo v. Prometheus suggests
that one should ask whether or not the claimed 'invention' adds 'enough' to the
abstract idea. On this line of reasoning, the claim does not satisfy the
requirements of Section 101 on the grounds that it is computer-implemented, if
the computer implementation contains no more than merely conventional steps. I
note that the Patent Office lawyer, Nathan Kelley, is reported to have said that
'simply using a reconfigured computer to run an abstract idea does not make it
patentable'. This, I suggest, is different from the assertion with the word
'simply' omitted. A claim for a computer-implemented implementation of an
abstract idea should not preempt all computer-implemented implementations of
that abstract idea (which would seem to be the message of both Gottschalk v.
Benson and Parker v. Flook). Thus Supreme Court decisions would suggest that
one needs evidence of an 'inventive' application of the abstract idea, and of
claim limitations to the scope of what would otherwise be an overbroad claim, to
pass muster with section 101 and move on to the requirements of sections 102 and
103. Such a line of reasoning would be anathema to Judges Rader and Newman,
based on their opinions, and their adherence to the different principles laid
down by Judge Rich.

[ Reply to This | # ]

Groklaw's Report from the CLS Bank v. Alice En Banc Hearing at the Federal Circuit ~pj
Authored by: Doghouse on Saturday, February 09 2013 @ 07:43 AM EST
International Business Machines Corp., which has received the most U.S. patents for the past 20 years, and a lobbying group whose members include Microsoft Corp. and Apple Inc., said software needs legal protection because it contributes to the nation’s economy.

Classic General Bullmoose territory ("What's good for General Bullmoose is good for the USA"). IBM, Microsoft and other large companies like large patent portfolios because it gives them leverage and negotiating power. It has nothing to do with innovation, the Suits and Bean-Counters having long-since replaced technologists in any role that matters at both companies. I know (having worked for them for decades) that IBM will happily patent any bright idea its employees come up with, no matter what the subject matter - IBM has patents on things from traffic control to sex toys. More is most definitely perceived as better.

[ Reply to This | # ]

"Size is important" - Judge Kimberly A. Moore
Authored by: Ian Al on Saturday, February 09 2013 @ 10:49 AM EST
Never mind the quality, feel the width!

---
Regards
Ian Al
Software Patents: It's the disclosed functions in the patent, stupid!

[ Reply to This | # ]

Federal Circuit Judges
Authored by: albert on Saturday, February 09 2013 @ 02:55 PM EST
Here is a 'table' of backgrounds, highly condensed: I left out things like honors and awards. A quick perusal of the Supreme Court justices highlights a few generalizations:

1. SCOTUS justices have no technical degrees.
2. SCOTUS justices have no discernable IP backgrounds.

IMO, the problem with the Federal Circuit IS their IP backgrounds. Recent SCOTUS decisions seem to be more rational regarding patents. Logic seems to suggest loading the Court responsible for patent cases with patent experts. Logic just doesn't work in this case. Note to Justice Scalia: You are perfectly qualified to hear patent cases!


Federal Circuit-Judges
Name, Age, Education, Background
Rader (Chief), 64, BA-English-'74;JD-'78, Prof-teaching IP law; author-IP law.
Newman, 86, BA-'47;MA-'48;PhD-'52;LLB-'58, patent atty.
Lourie, 78, PhD(chemistry)-'65;JD-'70, IP law.
Dyk, 76, AB-'58;LLB-'61, private practice; author-patents.
Proust, 62, BS-'73;MBA-'75;JD-79;LLM-'74, NRLB; IRS.
Moore, 45, BSEE-'90;MS-'91;JD-'94, IP law; author-patent litigation.
O'Malley, 57, JD-'82, patent law
Reyna, 61, BA-'75;JD-'78, private practice; int'l trade expert.
Wallach, 64, BA-'73;JD-'76;LLB-'81, private practice
Senior Judges
Mayer, 72, West Point;JD(?)'71, private practice.
Plager, 82, AB-'52;JD-'58, Prof-teaching law.
Clevenger, 76, BA-'59;LLB-'66, private practice.
Schall, 76, BA-'66;JD-'69, private practice; DOJ.
Bryson, 75, AB-'69;JD-'73, DOJ.
Linn, 76, B.EE-'65;JD-'69, IP law; USPTO (examiner) '65 to '68.

[ Reply to This | # ]

Extracanonical thread? Thoughts on the audio
Authored by: macliam on Saturday, February 09 2013 @ 03:33 PM EST

The News Picks includes a link to the Court's website where an MP3 file of the oral argument is made available.

Although this is a 'news pick', maybe it deserves its own thread?

My impressions from following CAFC decisions in recent years, is that Judge Moore would be a potential swing vote. Many of the posters on blogs like PatentlyO do not seem to have a kind word for her, regarding her as a judge who cannot be relied upon to vindicate the rights of patent holders. At least, that is the impression that I have gleaned. She seems to have interrupted right from the beginning about the apparent detail of the system claims (UNIX workstations and the like.) She was the fence-sitter in ACLU v. Myriad, who came down in favour of Myriad. She interrupted right at the beginning of the oral argument, and I was frustrated that she would not allow the CLA attorney to get a word in edgeways. Was her mind made up irrevocably beforehand, or was she putting the Alice case strongly to seek to elicit arguments that might possibly change her opinion?

The concluding words of Mr Perry in rebuttal (obviously referring to Alice Corporation), as accurately as I can transcribe them:

There is no computer that they have invented. They don't have a product. They are trolling for royalties. Thank you, your honor.

[ Reply to This | # ]

Too bad we can't link software patents to sexual assault
Authored by: kawabago on Saturday, February 09 2013 @ 04:51 PM EST
Then NO would mean NO.

[ Reply to This | # ]

There are companies that spend tremendous assets -- money, time -- to develop real things
Authored by: Anonymous on Saturday, February 09 2013 @ 11:39 PM EST
And then there is Interval Research.

[ Reply to This | # ]

The real reason for Federal Circuit rehearings
Authored by: Anonymous on Sunday, February 10 2013 @ 05:54 AM EST
appears to be to collect more reasons to make the Supreme Court toss the whole
nonsense with vehemence.

It's annoying enough to see the repeated game of "the constitution's
wording says x but we really think its authors meant y". But at least
there is the excuse of a time difference.

The Federal Circuit, in contrast, has a back-and-forth with the Supreme Court.
And here the game is "the Supreme Court's wording says <<You got it
wrong again, knuckleheads>>, but I think they mean we really got it again,
knock on wood". How long are they going to keep up this game of "we
can handle more cases than you can, so we get to set the rules, and you can only
overturn a tiny fraction"?

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Argh, this is so disappointing.
Authored by: Anonymous on Sunday, February 10 2013 @ 10:20 AM EST
The argument was spectacularly interrupted by the twelfth judge of the Court, Judge Kimberly A. Moore. "How can this not be patentable? Look at these long elaborate flow charts! Look at this list of hardware specifications: controllers, a Unix Sparc Station, data storage, connectors ...!" She was whole-hog into the patentability of the technology. It is too vast and complex not to be. It is hard to call her clueless when she is one of the ones who makes the clues.

Judges with no clue what software is or how it works, are rubber-stamping the patents that are strangling the U.S. software industry by supporting patentability of basic mathematical functions. They believe flowcharts are innovative, and that software "reconfigures" a computer. Heaven help us.

I wonder if this handful of judges can even comprehend the magnitude of damage they are doing the U.S. economy. The consequences of their stupidity are going to be felt for decades.

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Not an "Abstract Idea"?
Authored by: macliam on Sunday, February 10 2013 @ 03:54 PM EST

I took a look through the '720 patent, to be found at http://www.google.com/patents/US7 149720

There are 157 pages in all.

The claims determine the bounds of the patent, but one might as well work through from the beginning. There are 4 pages of front matter, followed by 117 pages of figures.

Figure 1 depicts a circle of (what later turn out to be) 'stakeholders', that can interact with 'Processing Units'. The stakeholders include 'counterparty guarantors', 'regulators', 'product ordering parties' etc., and even include 'miscellaneous parties'.

Then comes the diagram (Figure 2a) that apparently wowed Judge Moore with its wondrous technical complexity. A miscellaneous array of what might be telephones, fax machines, personal computers with modems connected to a back office system which (according to the details of thelater specification) might consist of three Sun workstations running SunOS networked together. The realisation that one could run a financial information system on a small network of workstations must have represented an impressive conceptual advance fully worthy of patent protection in the early 1990s! But wait, there is more! The specification subsequently teaches that, whilst such a system might be 'broadly indicative', it would also be possible to implement the system in an 'alternative configuration' where each stakeholder has an individual workstation, and where the workstations are networked to each other. Indeed a network diagram for six such stakeholders could have the structure of a complete graph on six vertices, as taught in Figure 2b. Amazing technical stuff! No wonder at least one of the CAFC Judges seemed so impressed! How could such a system not be patentable?

With regard to technical disclosure, it is all pretty well downhill from here. The next diagram portrays the data processing system INVENTCO (a name apparently lifted from a later Walt Disney film called Meet the Robinsons, as I discovered on googling on 'inventco' to discover if there was an Alice Corporation product sold under that name). The patent discloses that INVENTCO has components with names like M-INVENTCO, I-INVENTCO, AXSCO, VIRPRO, INVENTCO SYSTEM #1, INVENTCO SYSTEM #2 etc. M-INVENTCO in turn has components such as CONTRACT APP #1 and MARKETS COLLECTION #2. CONTRACT APP #1 even has components like PROCESS #1, PROCESS #2 and PROCESS #9.

There follow diagrams specific to the Examples later expounded in the specification. These include flow charts with steps like "Select counterparty bid prices from short list and queue order" and decision boxes like "Matured contract processing required?" A minority of such diagrams seem to disclose actual calculations with financial variables:

  • PRICE(SID) = CALC_FUNC(PRICEFUNC(SID),PAYFUNC,PAYPARAM)
  • MT_DAY = PMAT - CUR_DATE

Then follow 43 pages of what appear to be printouts of a heterogeneous assortment of financial records. Working through these the thought occurred to me that Alice Corporation have apparently been granted a monopoly on financial information systems software for US-based banks, since banks could not perform the transactions preempted by the patent with financial information systems other than that provided by or licensed by the patentee. Suppose that the patentee decides not to license the invention, but sells computer products that turn out to be buggy and reliable. What recourse do the banks and other financial institutions have against the holder of the monopoly?

Following innumerable pages of these sample financial records one reaches the body of the specification. The section on 'Background Art' is a platitudinous essay on 'risk' and risk management. It is then asserted that 'management techniques for the "less tangible" forms of risk are in their infancy'. There follows a short paragraphs listing patents in the prior art.

The DISCLOSURE OF THE INVENTION

begins with what is surely a discussion of abstract principles of risk management, and descriptions of various types of transactions between stakeholders. The inventors seem proud of the fact that

in another preferred form, the invention provides that the phenomenon for an offered contract is specified such that the elemental entitlements for a range of outcomes are the same for each outcome.

This impressive technical achievement is then elucidated using the language of basic calculus. Apparently the data processing system can cater for situations in which financial variables x and y related by an equation of the form y = mx + b. (They return to this characteristic of the invention several times in later parts of the specification: presumably it adds a bit of technical spice to what otherwise would appear to be mundane descriptions of financial transactions.)

The patent does not attempt to claim an 'abstract' idea. How could it? Such a claim would not be eligible for a US patent, as everyone now seems to agree. However

Embodiments of the invention significantly advance the state-of-the-art of formulating and trading risk management contracts. Essentially this is achieved by a computing/telecommunications infrastructure that is capable of being accessed worldwide by any enterprise/individual having access to a computer and telephone network. Furthermore, a virtually infinite number and range of risk typescan be [sic] accommodated.

After a BRIEF DESCRIPTION OF THE DRAWINGS we come onto a DETAILED DESCRIPTION OF A BEST MODE FOR CARRYING OUT THE INVENTION. As mentioned before, the 'systems' configuration could consist of stakeholders interacting with an institution whose back office runs a network consisting of three Sun SPARC workstations. Or alternatively each stakeholder can have a workstation that is networked with those of the other stakeholders.

It is stated that 'the "virtual" level of the system 10 is termed INVENTCO'. One wonders whether or not the 'virtual' level of a 'system' qualifies as an 'abstract idea'. There follows a description of INVENTCO, M-INVENTCO, AXSCO, CONTRACT APPS and friends. This all seems to be at the level of processes somehow related to risk management and trading. There follow five examples following the history of financial interactions of one sort or another. The discussion is couched in terms of descriptions of financial trades, involving contract bid prices, discount rates, contract maturities and the like.

The third example is perhaps the most detailed at a technical level (ignoring the purely financial stuff divorced from computer-implementation). The programmer wishing to avail of the teaching of this particular patent could at least glean from it that certain transactions involving counterparties could be programmed using operations of addition, subtraction, multiplication and division applied to elements of associative arrays representing financial variables (prices, exchange considerations, payments) that are indexed by counterparty identifiers (represented by the variable SID). This example is probably the most technical part of the specification from a computer programming point of view. But would the programming techniques and structures disclosed to the PHOSITA be equally applicable in the other five examples of the Best Mode?

There is a Glossary of Agreed Terms. This does not appear to define the shadow credit record and shadow debit record that is central to the claims.

Finally we come to the claims. Claim 1 is to a 'data processing system', and requires a 'data storage unit', a 'computer' capable of 'receiving transactions', 'electronically adjusting' credit and debit records stored in the 'data storage unit' and 'generating instructions'. There is an explicit claim limitation: the 'instructions' must be 'irrevocable time-invariant obligations'.

Obviously a human working with pen and paper cannot infringe this claim, since infringement would require use of a computer capable of 'electronically adjusting' credit and debit records. But suppose that a human carried out the steps described in the claim, with the assistance of a PC with an Intel 80386 microprocessor, a 3.5 inch floppy disk to serve as a 'data storage unit', Lotus 1-2-3 spreadsheet software and WordPerfect word-processing software. Would the claim be infringed? Would the need to use at a minimum such basic home-office computing technology be sufficient to vouch for the fact that the claim is not drawn to an abstract idea?

This particular particular machine seems omnicapable for just about any sort of computerized risk-management scenario involving shadow records. It could be used where the transaction is 'linked to a share price' (claim 2), 'linked to a weather event' (claim 3), 'linked to a market event' (claim 4), 'involves the transfer of shares in financial or physical assets' (claim 5), 'involves a wager' (claim 6), 'involves the transfer of a commodity' (claim 7), 'arises out of a transaction involving money for goods, services, promises, credits or warrants' (claim 8), 'arises out of a collateralization payment obligation' (claim 21), 'wherein said period of time is part of a day' (claim 9), wherein said exchange institution is a 'credit card company' (claim 12), 'debit card company' (claim 13), 'bank' (claim 14), 'central bank' (claim 15) or is merely a 'guarantor offering credit to one or more parties involved in said exchange obligation' (claim 16). Moreover the particular machine has no problem dealing with transactions in which institutions operate in different time zones (claim 19). Maybe institutions might be interested in purchasing this super-flexible risk management system. But the Alice Corporation website only appears of offer a list of patents available for licensing.

Finally, I should point out that the US7725375 does look very similar, but includes as independent claim 39 a 'Beauregard' claim to a computer programming product comprising a computer-readable storage medium with computer-readable program code for implementing the invention.

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Gobsmacked by deliberate knowing ignorance
Authored by: Anonymous on Monday, February 11 2013 @ 02:44 AM EST
Judge Dyk then asked if there was a way to do "end of day netting" transactions without using the patents.
Dear me, I used to do this sort of thing with pen and paper when I was working as a volunteer with Trade Aid. Part of what was required was summing up the day's transactions, which required simple maths.

Later I discovered the various other techniques, such as matrix computations, etc, which are again, mere mathematics; and of course the long-winded calculations - but mathematically simple - that an elementary knowledge of statistics requires.

All that adding a computer does, to this task, is add speed and sheer number of calculations.

The argument was spectacularly interrupted by the twelfth judge of the Court, Judge Kimberly A. Moore. "How can this not be patentable? Look at these long elaborate flow charts! Look at this list of hardware specifications: controllers, a Unix Sparc Station, data storage, connectors ...!" She was whole-hog into the patentability of the technology. It is too vast and complex not to be. It is hard to call her clueless when she is one of the ones who makes the clues.
Indeed! let us examine the subject matter again, shall we?

PJ has sent out the order. Go to the Federal Circuit for the en banc oral argument of CLS Bank v Alice Corporation. This is a Biggie for software patent haters, right up there with Bilski. This adventure will shorten the usual commute, one of the most wondrous a dutiful worker could have. If he eschews the speed and risks of the subway, as he often does, he can take the express bus down embassy row to Dupont Circle, then cross downtown on H Street to Madison Place on Lafayette Square situs of the Federal Circuit and the White House.
How could this algorithm
he can take the express bus down embassy row to Dupont Circle, then cross downtown on H Street to Madison Place on Lafayette Square
not be patentable?

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Naive Judges
Authored by: Anonymous on Monday, February 11 2013 @ 11:50 AM EST
Judge Kimberly A. Moore. "How can this not be patentable? Look at these
long elaborate flow charts! Look at this list of hardware specifications:
controllers, a Unix Sparc Station, data storage, connectors ...!"

OMG are the judges that make our patent law so utterly gullible that they are
snowed this easily? Whatever happened to the LEGAL STANDARD that requires that
it advance the state of the art, not just impress the judge with meaningless
fluff! These clowns would grant a patent on the retroencabulator!

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Groklaw's Report from the CLS Bank v. Alice En Banc Hearing at the Federal Circuit ~pj Updated
Authored by: Anonymous on Tuesday, February 12 2013 @ 07:20 AM EST
Hi I have made a transcript of the oral arguments. Its rough but I'm working on
cleaning it up:

www.alatageneral.com/cls-v-alice-en-banc-oral-arguments.php

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