The Supreme Court Kills Abstract Software Patents: Who Wins And Who Loses

According to the U.S. Supreme Court, you cannot legally patent laws of nature, natural phenomena or abstract ideas. Especially if those abstract ideas are a generic implementation of doing something “on a computer.”

In a unanimous decision today, the Supreme Court invalidated a class of software patents that cover what it considers “abstract concepts.” The case, Alice Corporation PTY. LTD. v. CLS Bank International et al., concerned the patenting of a generic concept—a means of enforcing the settlement of debts in a multi-party financial transaction—to be performed on a computer by Alice Corporation. CLS Bank International argued that the patent was invalid because the underlying concept has long been part of finance and economics, and that the only thing new was that Alice performed its settlements using a computer.

Essentially, the Supreme Court ruled that no such abstract concept can be turned into a patentable invention simply because someone programs it into a computer. That’s going to have some important consequences for many existing patents, although reform advocates had hoped the high court might use the case to invalidate all software patents.

What Types Of Software The Case Affects

The ruling is fairly narrow in terms of its application but still a giant step in the long-standing campaign for patent reform. But if you think the ruling will stop the patent trolls in their tracks, you have another think coming. 

It might be easier to think of it in terms of what the Supreme Court didn’t do. It didn’t invalidate another common class of patents that cover “business methods”—i.e., supposed “inventions” that support new ways of doing business. Three justices believe that business method patents should be invalidated and filed opinions to that effect in the Alice case. In the 2010 case Bilski v. Kappos, the court ruled 5-4 to leave business method patents untouched.

The Alice decision leaves the open the possibility that more patents covering more complex software that can’t easily be boiled down to simple “abstract” ideas will remain valid.

Who Will Be Affected By The Alice Case?

There’s a clear set of winners from this decision, at least until the high court issues future rulings on software patents:

Large Technology Companies: Like, say, IBM and Microsoft. Both companies filed briefs supporting the Alice patents because of their own investment in thousands of software patents. Many of those remain untouched by today’s ruling.

Software Patent Defendants: One of the tangential benefits of today’s ruling is that it forces software patents to meet patent-eligibility restrictions described in Section 101 (35 U. S. C. §101) of U.S. patent law. That doesn’t fundamentally change much for patents in general, but it does allow defendants to rely on established legal defenses that can sometimes result in quicker dismissal of patent lawsuits.

Individual Developers: Individual software developers often say that they are against software patents. And that’s easy for most of them to say, as few indie devs have ever filed a patent. Still, the ruling should provide smaller companies and independent developers protection from patent trolls using abstract patents designed to force them to settle out of court or accept licensing terms.

Questions Remaining After Alice

Given that the Supreme Court keeps taking half-measures in patent reform, this will likely not be last time it rules on patent-reform issues. 

The court’s opinion, written by Justice Clarence Thomas, declined to define what an abstract patent actually entails. “We need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case,” the opinion stated. So the definition of “abstract” goes back to the lower courts. 

Overall volume of patent suits may decline, particularly if patent assertion entities—i.e., trolls—find it harder to clear the “abstract” bar. But that doesn’t mean that these patent troll entities won’t still try to scare smaller companies into settling for smaller claims. 

Lead image by Flickr user DonkeyHotey, CC 2.0

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