Opinion

Happy Anniversary, Alice v. CLS Bank!

It’s been two years since the Supreme Court handed down its decision in Alice v. CLS Bank, an important case that restated what the law already said: You can’t get patents on abstract ideas. Specifically, the Court unanimously held that tying an otherwise unpatentable idea to a “generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention,” and that tying an abstract idea to “purely functional and generic” hardware similarly will not make the idea patentable.

This language is important, as anyone who has faced a threat from a patent troll can tell you. The patent troll model is predicated on using low-quality patents as tools of extortion—to extract a quick settlement or hike up the costs of litigation—in an effort to make a quick buck or suppress competition. Alice directly rebuked that model by creating an important tool to get low-quality patents out of the system.

So far, it’s working. Since the Supreme Court decided Alice, the Federal Circuit—the appeals court tasked with hearing patent appeals—has found approximately 25 patents invalid. That’s not to mention the Patent Office actions denying patent applications in light of Alice and the more than 90 cases where a district court has invalidated patents in whole or part. (You can find a helpful full rundown of these cases here.)

These cases are meaningful and showcase just how absurd some of these invalidated patents can be. The courts have invalidated patents that:

  • Covered the showing of an ad before one could watch copyrighted content on the internet.
  • Claimed the invention “facilitat[ing] workplace collaboration through the Internet or an intranet without specialized software or calling on a system administrator or IT person for help.”
  • Covered a “system of automating telemarketing calls while allowing a telemarketing agent to personalize the calls to fit the needs of the potential customer and give the impression that the potential customer is speaking to a real salesperson, as opposed to listening to a recorded sales presentation.”

One of the worst trends with many of these patents is that, even assuming they invented something novel (they didn’t), they completely failed to teach how to practice the inventions they purportedly covered. To understand why this matters, a quick background on the patent system: The system is setup so that in exchange for clearly explaining how your novel invention works and, in a sense, dedicating it to society-at-large, you get a 20-year monopoly to exploit it first for financial gain. These invalidated patents all failed to uphold their end of the bargain: the teaching function and the delineation function, which should put the public on notice of what they can and cannot do. Instead, these low-quality patents run roughshod over future innovators who want to build something new.

Despite these positive post-Alice cases, hundreds of thousands of software patents remain on the books. Even assuming just a small percentage of those patents could be invalidated under Alice (and there is reason to believe it would be larger than a small percentage), you are looking at a significant number of low-quality patents that need to be challenged in a court or at the Patent Office, which can cost tens of thousands of dollars.

Traditionally, the patent system has been set up to represent the interest of patent holders. They tend to be the ones with the resources to lobby Congress and to pay for expensive lawyers. Among this set, there is a belief that borders on religion that all patents are good for the economy and that, somehow, the number of patents we grant as a nation proves how innovative we are.

I’m doubtful that was ever the case. But it is surely not the way today’s innovation economy works. Technology moves quickly and one needs little more than a computer and internet connection to build a tool or even a company. We want to incentivize that kind of creation, which leads to advanced technology and job creation. We are thankful that Alice put us on the right track two years ago and gave us the tools to prove that certain patents shouldn’t be on the books in the first place, but we still have a lot more work to do.

Julie Samuels is executive director of Tech:NYC and president of the board of Engine.

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