As noted in my analysis below (posted when the Federal Court agreed to hear this case en banc, a term explained below), this case is not about killing off software patents or other forms of business methods.

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."