Settlement Risk Patent Issue Heads to High Court

WASHINGTON (CN) - The Supreme Court late Friday took up a patent dispute related to a computerized trading platform in which a third party tries to eliminate "settlement" risk.

In any financial transaction, there is a risk that only one of the two parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counterparty's performance.

Australia-based Alice Corp. says its patents address that risk by relying on a trusted third party to ensure the exchange of either both parties' obligations or neither obligation.

Claiming that three of Alice's patents were invalid and unenforceable, CLS Bank International and CLS Services filed suit in 2007 for a ruling of noninfringement.

A federal judge in Washington, D.C., ultimately awarded CLS summary judgment and invalidated certain claims of the three patents.

In doing so, the court concluded that the method claims of the patents "are directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk."

As to the asserted system claims of the patents, the judge found those claims similarly ineligible as they "would preempt the use of the abstract concept of employing a neutral intermediary to facilitate simultaneous exchange of obligation."

A three-judge panel of the Federal Circuit reversed in 2012, however, after finding that the claims at issue, including claims drawn to methods, computer-readable media and systems, were all patent eligible under Section 101 of the federal patent laws codified at Title 35.

The court then held a rehearing en banc, and affirmed the judgment for CLS in its entirety.

Though the judges were unanimous that the asserted method and computer-readable media claims are not directed to eligible subject matter under Section 101, the court was equally divided as to whether the asserted system claims are not directed to eligible subject matter under that statute.

Per its custom, the Supreme Court issued no comment in granting Alice a writ of certiorari Friday.

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