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Supreme Court raises bar on software patent claims

New ruling in Alice Corporation v. CLS Bank means firms must do more to advance 'abstract' software claims to receive a patent.

The U.S. Supreme Court building in Washington, DC. Chip Somodevilla/Getty Images

A new US Supreme Court ruling may give the technology industry a new weapon in its continuing battle against so-called patent trolls.

In a decision announced Thursday morning, the court's nine justices ruled unanimously to dismiss a previous patent the government had awarded to an Australian company for business software. In issuing its ruling in Alice Corporation v. CLS Bank, the court set a higher standard for patent awards, saying Alice Corp. did not deserve a patent for generic computer implementation of an abstract idea.

"We conclude that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention," Justice Clarence Thomas said, writing for the court.

The case centered on claims by shell company Alice Corporation that CLS Bank, a currency-trading organization, had infringed on patents owned by Alice for the computer-based exchange of financial obligations. The patents claimed a unique method for exchanging those financial obligations, the computer system configuration necessary to implement that method, and the software code itself required for the exchange.

The court consistently has upheld the idea that abstract ideas, such as methods of doing business, are not patentable. This could call into question thousands of patents, as Thomas explained that "the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention." He applied the same logic to Alice's other patent claims of unique method and unique medium.

In his opinion, Justice Thomas referenced two previous patent cases in an attempt to clarify the US patent system. He referred to Bilski v. Kappos, a patent case from 2010 that the court split on, 5-4, and found that software which reduced risk-hedging to a mathematical formula was not eligible for a patent because that behavior was "a fundamental economic practice."

"It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here," Thomas said.

He also relied on the 2013 Supreme Court case, Association for Molecular Pathology v. Myriad Genetics, Inc., which said genes can not be patented, to emphasize that the court has a 150-year history of declining to support patents that attempt to codify abstract ideas. Thomas did provide an exception, citing 1981's Diamond v. Diehr, that "an invention is not rendered ineligible for patent simply because it involves an abstract concept."

However, the fallout from the case could lead to confusion over which software can be patentable and what can't. Patent analyst Florian Mueller noted that the Supreme Court goes to great lengths in Alice to define what a "generic computer implementation" is, but it doesn't say what constitutes a technical software patent, and that there's a lot of room for courts to fill in the gaps between Diamond v. Dehr and the Alice case.

Another possibility, Mueller said, is that the use of "generic" in the case to define software could lead to software patent challenges that allege that a patent has been granted for a commonplace idea or implementation.

Justice Sonia Sotomayor wrote a concurring opinion that no business methods should ever be patentable, which was the minority holding in the Bilski case. She was joined by Justice Ruth Bader Ginsburg and Justice Stephen Breyer, who were the minority justices still on the court from the Bilski ruling.

The court didn't answer the more fundamental question of whether software itself can or should be patented, as opposed to trademarked as some have argued.