Chaos Reigns as Software Patents Take Another Body Blow in Federal Circuit

UPDATE DEC. 6,2013. The U.S. Supreme Court announced today it will review the case cited in this article.

If you’re considering pursuing a patent for a software product, you might want to reconsider. The courts have made a seriously chaotic mess out of this subject in recent months, rendering the usefulness of such patents even more questionable than it has been.

A Federal Circuit  judge ruling on a software patent case has warned that the growing confusion over patentability of essentially abstract claims may already have caused the death of “hundreds of thousands of patents.” Judge Moore made those comments in a ruling on CLS Bank Int’l v. Alice Corp., No. 2011-1301, 2013 WL 1920941 (Fed. Cir. May 10, 2013).

In a plurality of opinions contained in a relatively rare 135-page en banc ruling, the 10-justice court essentially ruled that a particular software invention was simply unpatentable because of its abstract nature.

At issue in the case was Alice Corp.’s claims to a computerized method for dealing with the settlement of conflicting claims in a financial exchange.

Judge Moore wrote that the on-going and increasing uncertainty in court rulings over this issue is “causing a free fall in the patent system.” If all of Alice’s claims are not patent-eligible, she conjectured, “This case is the death of hundreds of thousands of patents, including all business-method, financial-system, and software patents as well as many computer implemented and telecommunications patents.”

The Federal Circuit more recently attempted to clarify the growing confusion surrounding software patentability in the case of Ultramerical v. Hulu, No. 2010-1544, 2013 U.S. App. LEXIS 12715 (Fed. Cir. June 21, 2013). That ruling did little if anything to provide insight into the rules and standards to be applied in answering the crucial question of what constitutes patentability of software.

Given the relative chaos that characterized these rulings, it is difficult to draw any definitive conclusions that have broader implications without hedging. But there is little doubt that the trend Judge Moore highlighted is real.

Alice is just one more reason not to rely exclusively on patents to protect software. We have been advising our clients for several years not to become overly dependent on patents for complete intellectual property protection. It is vastly more predictable to use clearly drawn agreements, copyright, and trade secrets law to provide insurance against IP theft or misappropriation.

Not only is the patent process time-consuming and very expensive, as Alice and an increasing number of rulings demonstrate, it’s not all that good at protecting the underlying IP even if the patent is granted. The mere fact that virtually all software is expressed abstractly makes the basic concept of patenting software at least questionable if not clearly outside the scope of the intent of patent law.

The average time lapse between an initial submittal of an application for a patent on software and its final issuance is in excess of five years today. In fact, the time to the PTO’s initial ruling — which is nearly always a rejection that must be argued in response — is 40 months. (

As if all that weren’t enough, creating new software applications using existing programs as an inspiration or template is all but common trade practice. A program with a pending patent (or an issued one for that matter) can be analyzed from the user interface in a different programming language with relative ease.

If you have investors who insist on you following the patenting process as a condition of their willingness to invest, by all means do so. But cover the IP with contracts, copyright and trade secrets agreements as well.