Supreme Court sets strict standard for computer patents
WASHINGTON — You take an idea that's not all that original and implement it on a computer. For that, the Supreme Court ruled unanimously Thursday, you don't deserve a patent.
Seeking to do its part to trim the proliferation of software patents, the high court nevertheless tread carefully to avoid ensnaring too many legitimate patents along the way.
The case had attracted legions of lawyers on both sides to the high court's chamber in March, as well as hundreds of pages of briefs from the likes of Google, Microsoft and IBM. Many had urged a solution similar to what the justices sought to devise Thursday: a reduction in flimsy patents without affecting the deserving ones.
The specific patent in question uses a computer to safeguard complex financial transactions, largely among banks. The program is intended to reduce the risk that one party can't hold up its end of the deal.
Justice Clarence Thomas, writing carefully for the court, ruled that the third-party settlement concept is an "abstract idea," and using a computer to implement it "cannot transform a patent-ineligible abstract idea into a patent-eligible invention." Not once did the 17-page opinion use the word "software."
Sounds simple, but the case, Alice Corp. v. CLS Bank International, posed huge risks for both sides. If the court had upheld the patent, the problem of proliferating patent lawsuits would continue unabated. The number of software patents granted annually has soared from about 2,000 in 1980 to more than 40,000. They account for nearly half of all patent lawsuits in recent years.
If the court struck down a broad swath of patents, it could have rendered thousands of existing ones extinct and created havoc for some of the nation's leading business and software companies. Nearly 3 million Americans work for software and information technology companies, which generate more than $250 billion in annual revenue.
So the court did neither of those things. Rather, it ruled narrowly and along the lines of its past precedents.
"An invention is not rendered ineligible for patent simply because it involves an abstract concept," Justice Clarence Thomas wrote for the court. Patents that pose no risk of pre-emption, he said, "remain eligible for the monopoly granted under our patent laws."
The financial settlement patent in question is owned by Alice Corp., an Australian company. CLS, which won its lawsuit against the patent at the federal appeals court level, uses a similar method.
The Supreme Court has not been a fan of patents in recent years. In 2010, it rejected a patent on a method for hedging losses in one part of the energy industry by investing in other parts. Two years later, it nixed a patent on a method of measuring the optimum dose of drugs while they're given to patients. And last year, it ruled that human genes can't be patented.
During oral arguments, U.S. Solicitor General Donald Verrilli had said that in a world of unlimited patents, ideas ranging from airline frequent-flyer programs to the Oakland Athletics' "moneyball" scouting system would be able to obtain patents.
"We're not saying they can't do it," Verrilli said. "We're saying they can't monopolize it."
But Carter Phillips, the lawyer for Alice Corp., had warned that striking down the patent could implicate "hundreds of thousands" of others. A brief submitted by IBM said such breakthrough applications as e-mail, Web browsing and cellphones would not have qualified.
Defenders of software patents breathed easier once the narrow ruling was released. "This decision is a victory for innovation," said Victoria Espinel, CEO of The Software Alliance. "The opinion makes clear that real software inventions are patentable under U.S. law."
"Software powers nearly every inventive device, service and product in our world today, and providing patent protection for software-enabled technologies is critical to incentivizing innovation in every industry and sector of the economy," said Horacio Gutierrez, deputy general counsel at Microsoft.
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