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Business law Current event

Businesslaw: Current event

AliceCorp Versus CLS bank

Ina world where there are new inventions almost on a daily basis,patent issues have become almost the order of the day. Businessorganizations are suing for using their patented products withouttheir consent. In most cases, these issues normally end at the courtswhereby a decision about the legality of the application isdetermined. Software patents have attracted the most number of casesin the world. This paper seeks to examine the patent case between atechnological organization by the name Alice Corporation and CLS bankin relationship to infringement of patent.

Theparties involved

AliceCorporation is a technology company with several patents under itsname. The company developed a technological method of settling claimsbetween two parties. As opposed to the conventional method ofsettlement which normally involves the two concerned parties, Aliceelectronic model allows for the introduction of a third party whoenables the transaction to take place thus reducing the risksnormally involved in the conventional platform. CLS bankinternational is a business organization which deals with thesettlement of financial risks in the Forex market. It is a financialinstitution which deals with the risk settlement between differentcommunity members including large and small corporations, commercialbanks, as well as central banks.

TheCase background

Thecase began in the year 2007 when CLS bank went to the court to seekinterpretation the interpretation of patent issue. The Bank had suedAlice Corporation pertaining to the legality of the patent. Inaddition, the bank wanted the court to declare Alice patents asinapplicable in any business environment and that the bank had notviolated against the claimed patent (Howe Para 3). In a swiftrejoinder, Alice Corporation moved to the court and sued CLS bank forviolation of patent. The case was ruled in favor of CLS bank. Thejury was based on Bilski v. Kappos as the precedent case. In asummary judgment related to the case, judges declared Alice patentclaim was invalid based on the provisions of patent. The case did notend there as Alice sought a review of the case at the courts ofappeal immediately afterwards. In July 2012, a panel of judges ruledin favor of Alice Corporation, reversing an earlier judgment by thelower court. In their opinion, Alice’s invention met the thresholdof being patent, just like any other computer-implement innovation(Howe Para 6). The panel also countered the previous argument thatAlice’s invention was just an abstract idea which failed to meetthe conditions espoused in the patent law.

Followingthe decision to reverse an earlier judgment, CLS bank filed apetition seeking for a repeal of the Federal circuit decision.Several issues were raised pertaining to the case. To begin with,there was the concern of what parameters to use in order to determinethe eligibility of Alice patent. In addition, there was the questionof whether the existence of a computer in a patent claim could makeit an eligible issue even though on the normal circumstance the ideawould be ineligible for patent claim. There was no consensus on theissue as the judges were split almost in the middle, each with adifferent opinion on the subject matter. The decision was howeverarrived in favor of CLS bank, citing previous arguments by the lowercourt that the idea could not be patented since it was just anabstract idea. Alice Corporation were not contented with the decisionand immediately moved to the Supreme Court to appeal. The company wasgranted appeal as it awaited for the interpretation of patent lawunder based on various aspects. A key concern in this case was theeligibility of patent application in the case of process, machinesand systems. It is a case which has attracted a lot of attention withseveral companies in the software industry seeking to be enjoined inthe suit. The case will be decided in June 2014.

TheLaw on Software and business method patent

Thelaw is very clear on the patent eligibility of business processes, aswell as software inventions. Under section 35 of the USAconstitution, any new invention related to machine, processes oranything which seeks to improve a previous invention is patentable.Article 35 Clause 101 explicitly states that “Whoeverdiscovers or invents any useful and new process, manufacture,machine, or composition of matter, or any new and useful improvementthereof, may acquire a patent therefore, subject to the requirementsand conditions of this title”(U.S constitution, Patent Act 101). However, the law provides a listof reasons where patent claim can be denied. Exceptions to patentclaim include, abstract ideas, physical phenomenon, as well as lawsof nature. While the law gives individuals the right to apply forpatent, it provides for the denial of claims in a case where alawsuit is applied. The lack of a suitable test to determine theeligibility of a software patent continues to elicit a number ofresponses.

Analysisof the case

Althoughthe law is very clear on what can be patented, the increasing numberof cases involving software and business methods patents presentssome legal challenges. In the case of Alice v. CLS bank, lack of anappropriate test to determine the eligibility of the patent is whatmakes the case challenging. This also explains the varyinginterpretation of the patent law further making it difficult todecide patents case. The law gives room for anyone who comes up withan invention to patent it. While this is clearly evident, the law isdifficult to implement In the case of a software or business method.One of the reasons which explain the complexity in the interpretationis the increased number of software inventions, as well as businessprocesses and methods. In the case of Alice Corporation v. CLS bank,critical examination of the patent act might help one to predict theoutcome of the case. To begin with, while Alice Corporation isentitled to apply for patent claims, it needs to evaluate itsargument. For one, the corporation’s application for patent is notvalid. In essence, Alice Corporations technological innovation boilsdown to what the U.S constitution terms as an abstract idea. Alice’sidea is just a modification of existing knowledge and does notnecessary involve an invention. Although the corporation may arguethat the existence of a mathematical formula makes its idea to be aninvention, it does not qualify it to the eligibility status as thesame may just be used to explain an abstract idea, a scientifictruth, as well as the law of nature. Based on this aspect alone, atthe Supreme Court may be ruled in favor of CLS bank. Additionally,Alice Corporation may not be granted its application for patentclaim.


Howe,Army. “Monday Round Up: Alice Corporation v. CLS Bank”. Scotusblog,Mar31, 2014. Web.