An abstract idea is not patentable simply because it is tied to a computer system, the U.S. Supreme Court has ruled, potentially making it more difficult to patent some software in the future.
The computerized trading platform for currencies owned by Australian company Alice is too abstract to be patented, the Supreme Court ruled unanimously, in Alice v. CLS Bank, released Thursday. The Supreme Court upheld a May 2013 U.S. Court of Appeals for the Federal Circuit ruling in favor of CLS Bank, which operates a global currency exchange. The Supreme Court ruling invalidates the Alice patents.
The Alice patent at the heart of the case was to safeguard financial transactions against the risk that a party in the deal would renege. It was essentially a computerized version of what is known as “intermediated settlement,” Justice Clarence Thomas wrote for the majority. “Merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention,” he added.
The idea of using third parties to mitigate settlement risk isn’t new, Thomas wrote, and tying that to a computer doesn’t make it patentable.
“The mere recitation of a generic computer cannot transform a patent-ineligible abstract idea to a patent-eligible invention,” Thomas added.
The ruling isn’t a direct assault on software patents, as some critics had hoped. But it should make it more difficult to get weak patents approved, said Julie Samuels, executive director of tech entrepreneur trade group Engine Advocacy and a long-time critic of software patents.
The Supreme Court’s ruling “tightened up the standards for getting patents on generic-use computers and hardware, which will shore up the worst of the software patents,” she said by email. “So this ruling is great news. It’s the latest in a long line of [Supreme Court] cases that tighten up the standards of patentability, which means, in turn, that improve patent quality.”
The ruling is a broad one and leaves open some big questions, said Daniel Brownstone, an intellectual property lawyer with Fenwick & West in San Francisco.
“The court gave very little guidance as to how to identify an ‘abstract idea,’ which is a problem that has plagued its [patent law] jurisprudence,” he said by email. “Many patented inventions can be expressed in terms of abstract ideas.”
Brownstone said he expects continued challenges to software patents, “with accused infringers casting asserted patents as mere directions to implement abstract ideas on computers.”
The Federal Circuit Court of Appeals, which specializes in patent cases, will likely have to deal with more lawsuits to “identify the contours of an abstract idea,” he added.
The Supreme Court ruling, while still leaving some questions about the interpretation of an abstract idea, adds clarity on the eligibility of ideas tied to computers, said Paul Schoenhard, an IP lawyer based in Washington, D.C., with the Ropes & Gray law firm.
The Supreme Court, for the first time, sent a “clear and critical” message that an abstract idea is not made patentable by tying it to a computer, he said. The decision gives important guidance on how to evaluate patents, he said.
Thursday’s ruling leaves open software patentability, as long as the software is inventive and useful enough, added Ching-Lee Fukuda, also an IP lawyer with Ropes & Gray and based in New York. “There’s plenty of debate to be had at the lower court level about whether a specific patent is invalid … but certainly a generic computer is not going to save your claim,” she said. “If nothing else, that one particular holding for a batch of patents that are currently being litigated.”
The Computer and Communications Industry Association, a trade group that called on the court to limit software patent eligibility, praised the ruling.
The Supreme Court decision will help curb a growing problem of infringement lawsuits from owners of questionable patents, CCIA President and CEO Ed Black said by email.
“The justices interpreted the law in a way that will cut back on some flimsy patents without impacting more deserving ones,” he added. “The U.S. Patent and Trademark Office will now need to issue new guidelines on software patents, and we look forward to reviewing them.”
ACT, a trade group representing app developers, also applauded the decision, saying it is “good news for software parents.”
The decision clarifies what is patentable and “removes some of the uncertainty,” ACT Executive Director Morgan Reed said by email. “Today’s decision reaffirms the validity of software patents which are a valuable tool for small company innovators.”
Updated at 11:58 a.m. PT with more reaction to the ruling.