Supreme Court Unlikely to Dissolve Software Patents

Tech companies worry how new limits could impact their software patent privileges.

The U.S. Supreme Court in Washington, D.C. on Oct. 29, 2006.

The U.S. Supreme Court  will likely determine by June on a software patent case that tech companies are watching closely.

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The U.S. Supreme Court appears wary of setting a new test to limit for the eligibility of software patents during the opening arguments of an intellectual property case as attorneys say software patents will likely be preserved in some form. 

Tech companies including Google are watching for any greater clarity on the vaguely defined software patents that could discourage costly lawsuits but companies like IBM fear limits that are too strict could damage decades-worth of intellectual property rights for computer programs. 

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The high court will likely determine by June whether CLS Bank International infringed on Alice Corporation's patents for its computer-based financial transaction system. Attorneys for CLS Bank argued at the high court Monday that patents held by Alice, a software company, are invalid because the patents represent an abstract idea that does not require the use of a computer, according to court documents. The court could decide to make a narrow ruling against Alice using a business method patent case precedent from 2010, called Bilski v. Kappos.

Greater clarity on the eligibility of software patents would benefit everyone “except patent trolls” says Peter Pappas, former chief of staff at the U.S. Patent and Trademark Office.

“It’s highly unlikely that the court will say all software patents are invalid,” Pappas says, adding he is hopeful for clearer guidance from the court on software patent eligibility. Pappas is a senior adviser for Engine, an advocacy group for tech startup entrepreneurs. 

Patent assertion entities - called patent trolls - sometimes use a poorly defined patent on a business method or consumer technology to extort an out-of-court settlement from small businesses. The Obama administration has criticized this practice and supported narrower definitions of patents to discourage such abusive lawsuits and allow the companies to save legal expenses to use instead on research and business expansion.   

The justices appeared to recognize the need to walk the line between preventing frivolous lawsuits that use broadly defined patents without damaging the intellectual property rights of companies that design software. Justice Antonin Scalia said Monday using a computer is not enough to make an idea unique and "patentable."

“If you just say use a computer, you haven't invented anything,” Scalia said. “But if you come up with a serious program that ­­ that does it, then, you know, that may be novel."

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Chief Justice John Roberts questioned the possible benefit of a test on software patent eligibility suggested by the Obama administration. The test proposed by the Obama administration would limit the software patent eligibility as something that improves on technology, not just a business method performed on computer.

"I'm just doubtful that's going to bring about greater clarity and certainty," Roberts said of the proposed test.

It will be difficult for the court to find the Alice claims patent eligible based on the precedent of its 2010 decision but it will likely “show some restraint” on drawing limits toward software patents, says George Beck, a partner with the law firm of Foley & Lardner in Washington, D.C. 

“My view is a brighter rule would be helpful regardless of where they draw it,” Beck says. “Like any rules some are going to be at more of an advantage or a disadvantage. Going forward at least you would know what the rule is.”

Patent lawsuits could spike if the court imposes the eligibility test proposed by the Obama administration, Beck says.

The case began in 2007, when Alice accused CLS Bank of infringement. The U.S. Court of Appeals for the Federal Circuit reviewed the matter but in May it was unable to reach a majority opinion on Alice's patent eligibility.