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Summary:

A new Supreme Court decision will cut down the number of computer-related patents, but will not, as some had hoped, eliminate software patents altogether.

Supreme Court

The Supreme Court  declared Thursday that a patent related to a centuries old financial concept was invalid since it was an abstract idea, even though the concept was implemented through a computer.

The court’s unanimous ruling serves to narrow the type of “inventions” that can be eligible for patents, and amounts to a minor victory for the technology industry and other companies that have long complained about software-related patents.

The case itself involved a patent for escrow services held by Alice Corp, a shell company regarded by many as a patent troll. The patent’s validity was challenged by CLS Bank, which runs a currency transaction network, and which argued that Alice’s patent simply described a settlement mechanism that banks have used for centuries.

“We conclude that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention,” wrote Justice Clarence Thomas.

Thomas also cautioned against allowing patents that relied on “the draftsman’s art” to turn abstract notions into monopolies on ideas.

The ruling appears to call into question the validity of thousands of patents which describe a familiar idea, but rely on a “method” of implementing it with a computer.

Although the decision does not unequivocally declare software patents to be invalid, it expresses deep skepticism of “simply appending conventional steps” to an abstract idea in an effort to make it patent-eligible.

The opinion does suggest, however, that patents may still be obtained that “improve the functioning of the computer itself or effect an improvement in any other technology or technical field.” It also cautions that the goal of preventing patents that cover abstract ideas should not “swallow all of patent law.”

Thomas’s opinion drew heavily on the reasoning from another recent case, called Myriad Genetics, in which the Supreme Court invalidated patents over human genes. Both opinions hold that applying familiar techniques to non-patentable things does not result in a patentable invention.

The Alice case amounted to unfinished business of sorts for the Supreme Court. In 2010, the court addressed the same issues in a case called Bilski, but failed to provide any clarity about what type of subject matter can — and cannot — be patented, which in turn produced another rat’s nest of lower court opinions.

In the new Alice ruling, the Supreme Court seeks to clear things up by offering a relatively simple two-part test that involves first asking if the patent covers a non-patentable abstract idea and, if so, if it proposes new inventive steps that could make it patentable. In the case of old concepts like hedging risk or creating escrow accounts, simply using a computer is not enough.

Initial reaction from law professors on Twitter suggested that law professors viewed Alice as an improvement on Bilski, but not necessarily enough to resolve the “patentable subject matter debate.”

While the ruling was unanimous, Justice Sonia Sotomayor wrote a one-paragraph concurring opinion, joined by Justice Ruth Bader Ginsburg and Justice Stephen Breyer, suggesting that all business methods are invalid to begin with.

The ruling comes at a time when the Supreme Court has issued a recent series of other 9-0 rulings that have highlighted problems with the U.S. patent system, including a flood of low quality patents that are often abused by so-called trolls.

For more on the case, see Vox’s Timothy Lee, who offers 7 takeaways and Patently-O, which highlights the opinion’s key paragraphs. Update: An analysis by renowned IP professor Rob Merges criticizes the new test as hopelessly broad, and claims the court should have just discarded some of it previous decisions, rather than trying to retrofit them into the new Alice test.

A marked up copy of the ruling is below.

Alice SCOTUS Decision

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Wednesday, August 27, 2014
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8 Comments

  1. The right decision, now move on to other computer patents, of old concepts and strike them down.

  2. Antony Clements Thursday, June 19, 2014

    Software is, for the most part inherently not patentable. Almost everything that software does is derived from an analogue process that has been automated. As computing advances the process becomes more and more abstract, but it’s still there. Software patents are also extremely difficult to prove without examining the source code, which various companies do not allow, nor is it required by law. Judges could look at source code, but without basic software dev training it means nothing to them. Even then, chances are the core of the patent claim rips off someone else. Rarely is anything entirely new or unique. Software patents also stifle innovation, as innovation is often an iteration on an existing idea, or combining several ideas. Apple is king of doing that, they haven’t “invented” anything since the mid 80’s, all they do is mash pre-existing technologies together, and yet no one pulls then up on anything. The reverse however is the opposite. Go figure.

  3. Even a broken clock is right twice a day.

    Congratulations to the supreme court for a right decision.

  4. jeffectiveness Friday, June 20, 2014

    I applaud the decision. I have long contended that it is absurd to patent business methods of a administrative or computational nature (vs. pure technology advances which may just happen to be applicable in business and ARE in my view patentable). At their root, all computer programs do just three things or a combination thereof: search, sort, or calculate (arithmetic and/or logic.)

    This is a great big step forward.

  5. Now they need to make laws that say a company that brings a patent case to trial and loses has to pay the the defendants legal fees and all expenses related to the case, without the defendant having to file a counter suit, it should be due immediately. They actually should require the plaintiff to pay the courts deposits before the case is heard that would cover the defendants legal fees in the case of a loss. That would put all these patent trolls out of business overnight.

  6. This is a great start. Now, we need to abolish the entire patent system / concept entirely. Or completely change the patent rules. You still get credit for the concept. But everyone if free to apply the process to their operations. Costs for every product with drop considerably.

    I’d like to see a break down of how many patents are owned by large corporations vs the little guys. Patents are designed to keep the big guys profitable, and price the little guys out of the market. At the most, give the patent holders a shorter time to capitalize on their idea. Like 3 years max. This should give you a head start in your market.

    Mainly, don’t allow frivolous patents that don’t really offer anything innovative and non-obvious (surprisingly, a patent condition that does currently exist, but is not applied in most cases (IMO)).

  7. George McDuffee Friday, June 20, 2014

    Time to review the entire rationale for patents. The environment in which the concept of modern patents was developed and implemented is now so different from the existing socioeconomic environment that many of the explicit and tacit assumptions are no longer even marginally correct. We have the tools to evaluate the costs and benefits of the current patent system [econometrics], and a critical, zero-based and in-depth aggregate societal cost v aggregate societal benefit analysis is urgently required.

  8. Great decision, not a great example of newswriting. Was it proofread at all? The lead sentence of the second paragraph is missing a critical word: “…that have long claimed [something] about software-related patents.” “Bilski” is misspelled on the first mention (“Bilksi”).