Richard Lloyd

In December last year the Court of Appeals for the Federal Circuit heard oral arguments in McRO Inc., DBA Planet Blue v Bandai Namco Games America et al, a case that many, particularly in the software industry, hoped would bring some much needed clarity to the issue of subject matter eligibility.

Although as a general rule the CAFC usually hands down a decision after around three months, the market is still waiting for that clarity, almost nine months after the arguments (you can find a recording of the oral arguments here). The Fed Circuit is not in the habit of alerting us to upcoming decisions, so it is only possible to speculate as to why we have been waiting so long, but this being a section 101 case and a software patent it’s hard not to think that we could have another Alice on our hands.

The two patents that are the focus of the case relate to lip synchronisation in computer-generated animation and were ruled invalid under 101 by a district court in Central California in September 2014, months after the Supreme Court issued its controversial decision in Alice Corp v CLS Bank. You can read a good summary of the suit and the oral arguments here from Zachary Silbersher of Kroub, Silbersher & Kolmykov.

Alice, of course, is the case that has come to personify the mess that some say has been made of 101 case law (former UPSTO head David Kappos now says 101 should simply be scrapped) and the marked split between the CAFC and America’s highest court on just what it patentable.

In the unanimous Alice decision, the justices elaborated on the two-stage test introduced in Mayo Collaborative Services v Prometheus Laboratories and focused specifically on when an abstract idea might be patentable. Since then, parts of the tech market have been looking for the Federal Circuit to give guidance on just what kind of software patents are eligible for protection.

Most recently that has come in the Enfish v Microsoft and Bascom v AT&T Mobility decisions which have at least helped alleviate concerns that software per se is not patentable. Those cases were heard in February and March respectively, well after the arguments in McRO. According to Silbersher, the rulings in both shouldn’t weigh on the three-judge panel considering McRO (the judges are Reyna, Taranto and Stoll) because, he says, the case asked a different question: “Namely, if a patent is directed to using rules for automating a pre-existing process, but does not specify what those rules are, can that pass Alice? That question leads to additional questions that were aired at oral argument — is claim construction necessary to determine whether the claims should be narrowed under Markman to require specific rules?  If so, should claim construction generally precede a motion to invalidate a patent under Alice?”   

That could be significant, Silbersher explains, because if the presumption is that claim construction should come before an Alice motion that would make it harder for defendants to knock out a patent under Alice in the early stages of a case. The decision from the CAFC should also determine whether the district court’s approach in McRO to analysing the patents’ claims was correct.  

As with any 101 case, in the McRO suit there’s not only the matter of the law but also of the Federal Circuit’s complicated relationship with the Supreme Court. A string of decisions from SCOTUS, which have reversed the lower court, has helped create much of the uncertainty around patent eligible subject matter. According to former CAFC Chief Judge, Paul Michel, the stark divisions that have clearly arisen between members of the judiciary, might be the reason for the delay in the McRO decision.    

“The Federal Circuit has been trying valiantly to clarify the limits of the dicta in the Supreme Court's quartet of 101 cases.  But the task is very difficult because each of these cases contains countervailing dicta, so discerning where the balance point lies is a great challenge.  And the SCOTUS standards are sufficiently ambiguous, indeterminate, vague and subjective that many judges have views that differ significantly from those of many colleagues.”

In addition, Michel points out, the Supreme Court, perhaps somewhat surprisingly, earlier this year declined to take the case Ariosa Diagnostics v Sequenom, another lawsuit that many hoped would provide further guidance on 101. That means that SCOTUS could be signaling that the Fed Circuit’s judges are now on their own when it comes to 101: “If they feel that they are going to write all the 101 law for a while, they may engage in a spirited contest to determine just whose view will dominate.  Several of them hold extremely strong but opposing views.”

SCOTUS might be reluctant to take more 101 cases in the near future but if the McRO decision – when it is eventually handed down - is another that highlights the divisions on the CAFC, they may feel they need to step in again.