Oral Arguments – Can Alice Get Out Of “Wonderland”?

And by “Wonderland” I am referring to the maze of hypotheticals and questions that were thrown at Carter G. Phillips by the Justices during his opening argument for Alice Corp. (A copy of the transcript can be found at the end of this post.)  Tasked with the seemingly impossible role of defending both business method patents and software patents, Mr. Phillips hardly got a word in edgewise. (He was first interrupted after only 8 lines of his argument.) One of the first questions was, “How is an intermediate settlement a less abstract [idea] than hedging”? Mr. Phillips only argument seemed to be along the lines: Alice just doesn’t claim a concept as simple as “intermediated settlements” – Alice claims a remarkably complex method of managing transactions in a modern economy that has to be computer-implemented.  He had to concede that programming a computer would not imbue the claims with that “something more” that Mayo requires and things went downhill from there, as he was hit with a hail of simple analogies relating to methods to assure solvency.

I probably wouldn’t be posting on the resolution of a question arising in the foggy swamp of business method patents, except that I found Alice’s brief somewhat appealing. I read it to maintain that there are two types of abstract ideas, ones that remain disembodied, such as “The Golden Rule,” and ones that may originate from disembodied human thought, such as a business method, but can be embodied in a programmed computer, and thus become machines or processes within the ambit of s.101. This is a bold position to take and Mr. Phillips didn’t take it. But after the shredding his position took yesterday, maybe attacking Benson head-on looks pretty good.

On the other hand, CLS Bank’s Counsel,  Mark A Perry, and the Solicitor General got lots of space to hammer home their points, which were pretty much the same:

“An abstract idea does not become patent eligible merely by tacking on an instruction to use a computer to carry it out. A computer makes a difference under s.101 when it imposes a meaningful limit on the patent claim. That occurs when the claim is directed at improvement in computing technology or an innovation that uses computing technology to improve other technological functions.” (S.G. at page 44.)

“Of course a patent that describes sufficiently how a computer does a new and useful thing, whether its data compression or any other technological solution to a business problem, a social problem or a technological problem, would be within the realm of the patents laws.” (Perry at 12).

The problem that the Justices seemed to have with this “rule” is that no one seemed to feel it could be uniformly applied. Neither Perry nor the Solicitor General could come up with examples that the Court recognized as different than any other business method. Another thing that drew me in to reading all 58 pages of the transcript was how many times Mayo (Prometheus) was cited. Mr. Perry led with it: “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.”

While the Court may well agree, Mayo “holds” no such thing since a claim to a drug regimen was at issue not an computerized economic principle. And the slight misquote is not from Mayo, it is from Benson. (Mayo, slip op. at 13). More importantly, Mr. Perry tried to export the Mayo requirement that “the claim itself has to recite something significantly more…than the abstract idea itself…we know that some devices, some methods, some programming will pass that [analysis].”  Mr. Perry even tried to goad the Justices a bit by stating that “there’s a significant element to the Federal Circuit that disagrees with Mayo and has been resistant in applying it.” Alice may well lose, but if the Court decides to import the “inventive concept” requirement  of Mayo into the legal Wonderland of State Street Bank and Bilski, heaven help us all!


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One Response to Oral Arguments – Can Alice Get Out Of “Wonderland”?

  1. Paul Cole says:

    Litigation advocates are taught the concept of a “theory of the case” i.e. a short statement preferably in no more than three sentences as to why the client should win.

    In Alice the needed theory of the case comprises a very short statement as to what has been invented and why it was truly inventive coupled with an an explanation as to why the invention is patent-eligible.

    For example it might have been said (if supported by the facts) that settlement risk was a serious problem affecting banks, especially in the days of high volume electronic trading, and that even in the 1970’s banks had been put at risk through unexpected inability of partners to meet a settlement e.g. because of regulator suspension of the partner’s trading. The claimed computer systems solve that problem in an electronic trading environment and can deal with the mass of incoming data for foreign exchange transactions and automatically and in real time reject transactions that are not covered by funds and represent a high risk. The invention provides the first machine of this kind which was avaialble to the banking industry and was a remarkable step forward as evidenced by the success that the invention achieved. The invention cannot be dismissed as a mere idea because it is inextricably linked to computer implementation: the ability of computers to process transactions at high speed and discriminate in real time between allowable and prohibited ones is essential to a safe trading system. The man with the abacus never in reality faced the problem and nowadays computerised equipment of great technical sophistication provides an indispensible infrastructure to banking.

    Instead Carter Phillips opened with an admission that the claimed subject matter was affected by s.101 as interpreted by Bilski and that the key question was whether the judical exception applied to the present facts. No wonder that he was interrupted by Justice Kennedy. The oral argument started at page 3 of the transcript and I fear that the case may have been lost by page 5.

    In truth, if Alice could not make a convincing statement of the kind indicated above, they should never have gone anywhere near the Supreme Court.

    The answer to Justice Kennedy’s question on page 5 was not that any undergraduate could have done the necessary programming, but that the problem was a long-standing one and the indentification of the steps needed to mitigate it that could be implemented on a computer was non-trivial, as evidenced by the delay between the appearance of the problem in the 1970’s and the postulates solution decades later.

    Despite the seniority of the court and the advanced stage of the litigation, the basic skills of a prosecution attorney arguably had much to contrbute.

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