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.”
— Harry Surden (@HarrySurden) June 19, 2014
— James Grimmelmann (@grimmelm) June 19, 2014
— Brad Greenberg (@bradagreenberg) June 19, 2014
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.