As expected the Supreme Court decided carefully and narrowly the case brought by Australian company Alice which had lost a lower court ruling to CLS Bank International involving a patent that essentially manages and safeguards documents with the intention that painstaking hours spent on transactions do not result in deals that go bad. The Court was not persuaded that the patent should be upheld with Justice Thomas, who wrote the opinion for the Court, stating that using a computer to implement an abstract idea “cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” Notably the opinion left out the word “software.” True to form when one essentially does not want to abolish the means to get to a destination utilizing a similar tack to the one that was just obliterated, Thomas also stated essentially that just because something is abstract that doesn’t make it patent ineligible.
So yesterday businesses around the country and indeed the globe breathed a deep sigh of relief that the Supreme Court’s foray into software patents did not result in utter chaos for all who depend mightily on software as a business and by extension, software patents. We did not expect anything else but with SCOTUS one never knows for sure. The wheels of patent justice that paused in anticipation of this decision may now churn again and to some extent the great anxiety of the past six months is over. Couple that with what sure looks like a step back on patent reform by Congress and we must conclude that the hallways and boardrooms of patent litigation firms around the country are abuzz with talk of high times once again. While the effect may be delayed we expect this result to usher in a renewed upswing for those companies pursuing legal enforcement on software patents where prior to the Alice case their position appeared strong.
One note that is worth mentioning and if obvious please forgive. We took a decided step back in our patent case coverage given the effect of Congress, the Supreme Court case now decided and the significant emerging impact of the Patent Trial and Appeal Board (PTAB). Like many investments, real gains may only be experienced over time- except when one is talking about investments that ride on court decisions (oftentimes less on underlying merit that who tells the better story-especially since software patents are often quite abstract and these arguments are being heard by a judge who is busy “boning up” on whatever the underlying technical science is or by jurors, many of whom are often completely clueless) which have to make these among the most speculative of investments. Usually if one intends to wait a long time to realize gain one does not also want to bear the burden of significant risk. Therefore, in our view, there are better times than others to invest in these stocks and that is what we will focus on in the future. If one wants the blow by blow of every document that is pushed the Vringofreeforums board is the best place out there in my view. The VFF arguments are often articulate and persuasive. We will focus on what we view as the Burr v. Hamilton duel moments and will tell you who we think will be shot and why. We believe it is those moments that will prove to be most decisive and can provide a window into shorter term profits-presuming one is not on the side which is looking down at their blown away midsection. In Vringo’s case against Google (yes we know it was called something else) the shot heard round the world was the laches shot. In the span of what appeared to be no more than 16 hours, from the time Judge Jackson received Google’s notebook to his ruling the next morning, Vringo lost what would prove to be some $700+M. We can analyse and say anything we want but in that moment and for a year and a half afterward it has proved to be a defining moment in the case and one which, in addition to the juror’s math (again cluelessness which we called from the start though some wanted to argue with us-we were there folks), crippled Vringo’s share price from which it as yet, though we believe that will change with the appeal’s ruling, has not recovered. So investing in patent cases is a cautionary tale and while we will continue to provide commentary as we think it is valuable, we will also look to provide insight into companies that may yield fruit in shorter time frames.
As always, these are our thoughts only. Invest based upon your own due diligence or with the support of a trusted financial adviser only.