Supreme Court Rules Against Software Patents

SAN FRANCISCO -- A Supreme Court decision today may affect the technology industry for years to come. The justices' unanimous vote in Alice Corporation Pty. Ltd. v. CLS Bank International renders software patents ineligible as abstract ideas. Such ideas, the court said, have always been patent ineligible.

The Australian company Alice International had obtained patent protection for software that creates a settlement between two parties and generates instructions to the institutions involved to carry out their agreement. The justices ruled that the software was generic and did not make technical advancements or improve how the computer functioned.

"The patents at issue in this case disclose a computer-implemented scheme for mitigating 'settlement risk'… by using a third-party intermediary," Justice Clarence Thomas wrote in the court's opinion. "We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention."

Open-source advocates such as the Electronic Frontier Foundation (EFF) called the ruling a step in the right direction to curb patent trolls and improve consumer experience.

"We think that it will cut down on a lot of the worst patents that are out there, the most ridiculous and overbroad software patents… A lot of patent trolls' patents are now more questionable then they were," EFF staff attorney Daniel Nazer told us. "I think maybe there will be more of a focus on trying to create products people want and putting them in the market place rather than fighting each other with patents."

Though patents have been hotly debated as both detrimental instruments and catalysts for innovation, industry analysts said the ruling doesn't change much or provide a rubric for patentability. Those seeking patents will have to figure out what constitutes generic software and what is actual invention.

"Those applying for or defending software patents will argue that their inventions are not 'generic' computer implementations of abstract ideas," Florian Mueller, an analyst following patent disputes, wrote in a blog post on the Supreme Court ruling. "Those challenging such patents will try to define 'generic computer implementation' as broadly as possible and argue that every software patent they attack involves previously known computing technology and an abstract idea."

Patent attorney Jeffery Frazier told us that whether the ruling will deter patent trolls is up for debate. "People that draft applications are going to think around these lines and include language that sounds like there's an improvement made."

Nazer expects "wide and narrow interpretations" of the ruling, as well as the invalidation of many software patents. Still, the ruling "doesn't purport to be a decision invalidating software patents." Trolls will likely continue to operate, but they will try harder to avoid court rulings.

Language around the ruling may be cause for concern among hardware engineers. The term "computer-implemented" refers to the mode of invention, rather than the invention itself. Frazier said system elements such as a data storage unit and communications controller were called out in the case as generic, but they were only named at a high level.

"It concerns me a little bit. I'm sure it was the right thing to do here," he said. "Don't see it eroding patents on the system side or creating problems for hardware manufacturers. My concern is more trying to figure out where the line is. How far down from the high level that these claims were reciting do these hardware elements become tangible?"

The ruling was issued nearly a year after the Patent Litigation and Innovation Act of 2013 was introduced in the House of Representatives. Julie Samuels, then a senior staff attorney for the EFF, wrote in a blog post in December that the bill "gives defendants tools to fight back, makes litigation cheaper and includes an important fee-shifting provision."

The bill cleared the House and garnered support from President Obama, but Sen. Patrick Leahy (D-VT) removed the bill from the Senate Judiciary Committee agenda last month.

"The full contours of this decision will take some time to work out. The Supreme Court has left a lot of work for the lower courts to do to interpret it," Nazer said. "It's going to be 2-3 years before we have a good understanding of what the decision will mean in practice. But this is promising. There's a lot of good language here."

>> Similarly if C was patented then we shouldn't have seen so much of growth in software development.

It is the chicken and egg question. The true fact is that the software lawyers are smarter than their hardware equivalents. When you buy Windows and want to build an application on it, you pay Microsoft license on the product. But Intel powers the OS for Windows and they simply pay-out for the hardware. Intel could have also asked for royalty for OS running on their hardware. Oracle gets money from banks running banking applications powered by Oracle. Yet, IBM and co that supply the server do not (only puchase revenue).

>> , I totally agree with you. Software is as important as hardware for optimal systems performance.Some times the performance is limited by the software and not hardware.

That is why they have valuations in multiples better than IC startups becuase they make all the difference. Hard to see any IC firm at startup phase with $250M valuation. Yet, we see these web startups in the north of billions of dollars.

Seems to finally rule out Amazon's "One Click" which is long overdue, along with dozens of other SW implementations of existing HW. Take Apple's slide switch to turn off a phone, slide switches have been in use longer than I've been alive and yet they want to patent that LOL!

Per comments, it's important to clarify that the Supreme Court did make a decision *on one case* and not all software patents; though the decision has implications on future patent requests.

Several commenters also have taken issue with abstract ideas being patentable, and I think there may have been confusion over the lede in this article. Software has not always been considered an abstract idea, but abstract ideas have long been considered patent ineligible:

"A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right." Le Roy v. Tatham,55 U.S. (14 How.) 156, 175 (1852).