That said, it is very significant in that the Federal Circuit has elected not to go wildly back in the direction of upholding loose patents and in mitigating the damage that would have been caused by a potentially pernicious approach to upholding software patents that had been adopted by the panel whose decision it reviewed. The result is basically an uncertain hodge-podge that will not in itself work to kill off software patents.

To give some legal context to those who may be interested, my technical analysis from 7 months ago follows:

"1. The CLS Bank v. Alice case, though raising an issue of vital importance, is not about 'whether software is patentable.'

2. Over the years, the Federal Circuit has notoriously broadened the scope of patent eligibility, most conspicuously in its 1998 State Street decision which essentially opened the floodgates to the modern rush of business method patents by holding that virtually any business method was patentable so long as 'it produces a useful, concrete and tangible result.' In 2010, the U.S. Supreme Court, in the Bilski case, repudiated the State Street test for patent eligibility and, though upholding software and business method patents generally, directed courts to be much more vigilant to ensure that no one gain patent rights to what are mere 'abstract ideas,' however much they may incidentally be tied to some computer mechanism in their implementation. In a follow on decision (Prometheus), the U.S. Supreme Court similarly cut back sharply on the permissible scope of patent eligibility for claimed inventions that constituted nothing more than laws of nature.

3. In this CLS Bank case, the claimed patent involves a method for eliminating certain types of risk associated with an escrow closing and used a technological process by which to mimic a phantom version of the closing as a security check before allowing the real transaction to close. In essence, the technological aspect of this 'invention' is routine and so the question is whether anything beyond that is simply another way of trying to patent nothing more than an abstract idea. If so, it should fail under Bilski; if not, it would potentially pass the test for patent eligibility.

4. The lower court in CLS Bank held as a matter of law that the 'invention' was nothing more than an abstract idea and held it invalid as being ineligible for patent protection. On appeal, a divided panel of the Federal Circuit reversed and reinstated the patent. It did so, however, by setting out a brand new procedural rule whose effect would be to gut much of Bilski and reopen the floodgates to huge numbers of business method patents under a very loose standard - to wit, by holding, that, if it 'is not manifestly evident [my emphasis] that a claim is directed to a patent ineligible abstract idea,' then the court essentially treat the claim as eligible. What the Federal Circuit panel did, then, was to take the Supreme Court's directive for lower courts to be much stricter in evaluating dubious business method patents for patent eligibility and recast that directive in a form that said, if you as a court see that something is obviously nothing more than an abstract idea, then go ahead and reject it but you are otherwise to treat as being eligible for patent protection. In other words, the new strictness found in Bilski for evaluating such claims was once again to be transformed by the Federal Circuit into a loose standard that would let such claims coast by unimpeded.

5. Of course, this has set off alarm bells because, in effect, it represents yet one more revolt by the Federal Circuit against attempts by the Supreme Court to rein it in by bringing patent issues back to some semi-sane state. Following the panel decision (which was rendered over a sharp and stinging dissent), the losing party petitioned for a rehearing en banc (meaning by the full panoply of Federal Circuit judges as opposed to merely a 3-judge panel) and this was granted. Thus, we shall see whether the Federal Circuit is prepared once again to stick its thumb in the eye of the Supreme Court or whether it will temper its extreme pro-patent proclivities and follow the law as it has been directed.

So, this is a very important case affecting the trend of patent enforcement in a profound way but does nothing to challenge the idea of software or business methods being patentable in a general sense. For anything to change in that regard, Congress must act."

If only someone would create patent troll shell companies whose sole purpose is the sue the Federal Circuit over ridiculous business method and algorithm patents. Maybe then they'd realise what they're doing to the world.

The beauty of life tenure is that you don't have to care whether your specialization is relevant or not. Fewer patent cases for them mean more vacation time.

What's behind the Federal Circuit's sometimes overzealous patent jurisprudence is the echo chamber effect that comes from a court that so specialized. People who work very intensely in an area tend to think it's the most important thing in the world. You see this exact phenomenon on Hacker News with regards to startups.

There is also the fact that those on the Federal Circuit who do have engineering backgrounds have them in "Big Engineering." To use as an example, Judge Moore, who dissented in part in this opinion, has BS/MS degrees in electrical engineering from MIT and worked at the Naval Surface Warfare Center. How engineers in that space view patents is just wildly different from how software folks in Silicon Valley view patents. Raytheon, etc, isn't sitting around worried that a patent troll will bankrupt them. They do, on the other hand, want to keep Lockheed from stealing any of their ideas.

Perhaps the most salient point is that federal judges are highly academic people. For a legal scholar, the simple solution of "just ban software patents" isn't a solution, it's just a kludge. They seek some principled way to draw the line between patentable and not patentable. Which is why there is all this milling around looking for one.

I would add to that with the simple statement that many if not most of the Federal Circuit judges are from an patent lawyer background. We get a system like this when patent lawyers, who become patent judges, get to balance public interests vs patent owners.

Patents aren't the goal, they're a tool congress can use. The goal is to promote the invention of useful things.

Patents are probably the worst way you could come up with to do this in terms of collateral damage to society, and benefit to inventors.

Academics would try to square the circle forever if funded and as you point out judges are funded. They don't have a stake in solving the problem, just looking clever.

Not knowing when to quit and endlessly looking for any way around a perceived kludge is usually the source of more kludges...

So you have to understand where patents fit into the big picture. For the last half century or so, legal theory has been heavily influenced by economics. Patents are a classic case of addressing an economic problem (the free rider problem), with a legal solution (property rights).

So it's not just that patents are a tool. Patents are property, and property is the tool.

> Academics would try to square the circle forever if funded and as you point out judges are funded. They don't have a stake in solving the problem, just looking clever.

Judges have no stake in looking clever either--unlike academics there is no publish or perish. They do care intensely about fashioning good law, however.

> Not knowing when to quit and endlessly looking for any way around a perceived kludge is usually the source of more kludges...

I don't really see how you get from point A to point B here. You avoid implementing the kludge so you don't have to live with the ramifications until the heat death of the universe (which is the average lifespan of kludges).

Of course it's profitable though, to declare other peoples' ideas to be your property, so if that's the metric it's a great success. The big picture is always the same.

> Judges have no stake in looking clever either--unlike academics there is no publish or perish.

Nearly all judges have stake in is looking clever. Being cited. You pointed out their lack of direct stake.

As for kludges, yes. Exactly. You rabidly avoid implementing a kludge for fear of supporting it forever and in doing so invariably produced worse solution and gotten less work done than if you'd focused on the goal instead of the details. Everyone has probably been there.

Patents are a hack to keep 'useful' companies afloat and reward 'real' inventors. I see the perceived needs for those, and might even agree, but using patents is like trying to fly with bricks and when it fails deciding you need more bricks.

In neo-classical economics, the free rider phenomenon is definitely a problem, not "progress." It is something that undermines economic efficiency.

Now, you can argue that it's not something that actually manifests in reality, and maybe you're right about that, maybe you're wrong. But I'm not presenting my worldview here, I'm explaining the intellectual context in which the existing patent regime has arisen. There are people who think of "sharing" as being conducive to economic well-being. That's not the neo-classical worldview. That worldview is, to a first approximation, trying to figure out how to turn everything into property so it can be bought and sold. Buying and selling is seen as conducive to economic well-being.

> Nearly all judges have stake in is looking clever. Being cited.

"Being cited" is not really a thing that judges strive for.

> Buying and selling is seen as conducive to economic well-being.

Oh gosh no. Buying and selling might not work to your benefit. Far better to be the guy who labels everything for sale and sells it. Absolutely zero risk.

Which is why patents are a dream.

Further, that reasoning (make things property to stimulate the economy) is as obviously broken as breaking windows for economic growth. It only works in the short term while there's stuff to stick a price tag on, and it's only wildly profitable when it's other people's stuff.

Considering that it wasn't action by Congress that lead to this situation, why is action by Congress required to fix it?

Business methods are surely processes, and this simple and general language does not admit a lot of ad-hoc, judicially created exceptions like ("but no software patents.")

Furthermore my understanding is that the Supreme Court has punted on this issue. But since the ruling precedent is from United States Court of Appeals for the Federal Circuit, the window is open for the Supreme Court at some point to disagree with business method patents. (Though Bilski showed no evidence that they are eager to tackle that issue.)

35 USC 101 was always read very broadly--it's just been relatively recently (for obvious reasons), that business method patents have become relevant.

It could always have been read broadly, but was it in practice?

Wikipedia brought up the 1908 Hotel Security Checking Co. v. Lorraine Co and the 1950 Joseph E. Seagram & Sons v. Marzell as examples of cases where courts rejected patents on business methods. Furthermore the USPTO for many years would not accept such patent applications. Not out of capriciousness, but because they really thought that such patents would not pass legal muster.

These stand as examples showing that 35 USC 101 was not always read as broadly as it is being read today.

You are right that Congress is not the only branch of government that is constitutionally permitted to opine on the scope and subject matter of patents. But, as you note, the Supreme Court has punted on this, which indicates that they prefer to let change come from the electorally responsive branch. Which makes it likely that this decision will be reversed or remanded.

That said, I think what Judge Moore calls a "narrow" exception to patentability needs to become bigger. It shouldn't be possible to recite some basic boilerplate and patent an abstract idea so long as you tie it to a specific hardware platform. I think this ruling helps set the stage for a reasonable decision by the Supreme Court on the issue, in the vein of its very measured patent jurisprudence over the last decade.

We've lost our competitive edge in manufacturing due to cheap overseas labor. The future of our economy is going to be IP and services export.

The method and computer readable media claims were held ineligible by a majority of the court The systems claims had an equally divided court, and the result there is to affirm the district court judgement.

See http://www.cafc.uscourts.gov/images/stories/opinions-orders/...

This was an en banc (IE whole court) opinion, which to the degree it was a majority, is binding on not just lower courts, but all future 3 judge panels (the normal size) of the appeals court. To the degree it was an equally divided court, it is not binding precedent.

Also, what usually happens in patent cases this is that the future 3 judge panels that disagree with the decision twist the hell out of it to avoid it.

I can understand patenting things like file formats (e.g.: PSD) but general computer operation "controlling tones over a device connected to telephone lines to initiate a connection between a remote computer and a local one" or the more stupid GUI patents or obvious usage patents.

I have no problem if they all go away.

The former is a format. The latter sounds like a protocol. Formats should be patentable but protocols shouldn't?

The trouble with this is that file formats (and other communications protocols) have network effects, which greatly amplify the power granted to the patent holder.

Somehow I think the possibility of this stopping all software patents is a bit exaggerated. And since half the judges disagreed about why these patents were invalid, it sounds like the quoted EFF lawyer is probably right: "No one understands what the hell is or isn't patentable, including the ... federal circuit."

Don't worry, a way will be found that can fit the minimum justification necessary to uphold a fake framework of legitimacy. It always happens that way in our society, if consequences are too uncomfortable, well, let's just make sure the consequences don't happen and tell ourselves that it's legitimate that we just changed the rules of the game in order to triumph.