U.S. appeals court takes up closely watched patent fight

Thu Feb 7, 2013 3:19pm EST
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By Erin Geiger Smith

(Reuters) - A federal appeals court is set to consider a case closely watched by Google Inc, Facebook Inc and other technology companies that could determine how far the patent system should go in protecting software inventions.

The U.S. Court of Appeals for the Federal Circuit, which specializes in patent cases, will hear arguments on Friday over whether patents should be granted for business methods whose main innovation is that they require the use of a computer.

Only some business methods can be patented, an issue that has gone to the U.S. Supreme Court.

CLS Bank International, which runs a foreign-exchange settlement system, is seeking to convince the Washington, D.C., court's nine judges that financial markets technology company Alice Corp's patents represent abstract ideas and are thus invalid.

Alice, based in Melbourne, Australia, and owned in part by National Australia Bank Ltd, holds a portfolio of patents, including four that cover a computerized system for exchanging financial obligations. The company argues that when an invention requires the use of a computer, even if it involves an abstract idea, "it's patentable if the computer plays a significant role in the invention."

In July, a three-judge panel of the appeals court agreed with Alice in a split decision. But dissenting Judge Sharon Prost criticized the majority for flouting Supreme Court precedent. CLS was later granted its petition to re-argue the case before the full court.

CLS, which originally brought the case in 2007, has argued that Alice's patents seek to monopolize an idea that's long been a part of financial transactions.

"Computer-implemented methods are important to the economy, and we hope this case can shed some light" on the law in the area, CLS attorney Mark Perry, of the law firm Gibson Dunn & Crutcher, said in an interview.   Continued...