Software Patents Shaken by Supreme Court Ruling

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Software Patents

The U.S. Supreme Court has weighed in on the issue of software patents for the first time in 33 years, potentially shaking the accepted practices. In the latest Alice Corp. vs. CLS case, the court decided that an abstract idea, such as a financial algorithm, cannot pass by merely appending “on a computer” to it. This ruling could have huge implications for tech and business worlds of software development which have been plagued by patent wars and so called “trolls” in the past few decades.

The patent in question deals with the use of a computer to estimate and eliminate the “settlement risk” when one party reneges on a financial deal. Linda Thayer, a partner at the Boston office of Finnegan, explained that abstract ideas can no longer be patented merely by applying them in the form of a computer program. She explained that “if a claim smells like something that’s been done for a long time, it’s not going to make it patent-eligible to just say it’s being done with a computer.” Such claims must result in a process that makes computers tangibly more efficient. This could prove a big step in the confusing and aggressive history of software patents.

In 1972 ruling of Gottschalk v. Bensonin, the Supreme Court rejected a patent on a computer algorithm claiming that the patent could pre-empt the math behind it and thus effectively be “a patent on the algorithm itself.” The belief was reflected by many software giants of the era, such as IBM and Microsoft. In 1991, Bill Gates stated that restrictive patents could bring the whole software industry to a “complete standstill.” Most companies favored copyrights instead, which still protected the initial inventor without stifling growth and innovation.

However, by the end of 1990s the tables have turned, as the lower Federal Circuit shook the industry by approving numerous software patents in spite of the earlier Supreme Court’s ruling. The number of patents soared and both IBM and Microsoft have reverted their stances by filling out dozens of applications. The recent huge Apple and Google lawsuit is just one example of the far-reaching consequences. The iPhone developer argued that Android phones were too similar to their own software, based on very basic patented functionality such as touch typing or multi-touch. These technologies are used by virtually any touchscreen-powered smartphone on the market. James Bessen and Michael J. Meurer, in their 2008 book Patent Failure, found that software patents are twice as likely to lead to litigation than any other category.

After 33 years, however, the Supreme Court has once again re-entered the debate, stating that patents cannot excuse an abstract idea by merely framing it as a computer program. As promising as the new ruling is for the idea of more open software development, it still does not answer the question of what constitutes an abstract idea specifically. The ruling alludes to section 101 of the patent law, which states that the invention must be a “useful process, machine, manufacture, or composition of matter.” In case of a software patent, the Supreme Court interpreted it as meaning a tangible improvement in the efficiency of the algorithm.

While the full repercussions of these decisions are still not fully known, Thayer further explained the practical outcome means that patent lawyers will have to consider how a given invention improves the performance of the computer. Patents which merely implement a commonly utilized process could be invalidated. Could this mean that many proprietary technologies, such as the touchscreen implementation owned by Apple, no longer qualify? It is too early to tell and further litigation cases will have to answer that. If the lower courts abide by this decision, however, the Supreme Court ruling might have effectively shaken the software patent industry, setting a new precedence for the future of technological development.

By Jakub Kasztalski

Supreme Court
Washington Post