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Supreme Court limits the scope of software patents

General Views Of The U.S. Supreme Court BuildingGeneral Views Of The U.S. Supreme Court Building
Equality for all.Andrew Harrer/Bloomberg—Getty

The Supreme Court has deemed that abstract ideas without a novel application are not patent-eligible, limiting the scope of software patents.

The U.S.’s highest court ruled Thursday in the case of Alice Corp. v. CLS Bank International that an abstract idea applied to a generic computer is not “enough” to transform that idea into a patent-eligible invention.

The decision still leaves room for most software patents, though the court doesn’t elaborate beyond outlining what constitutes an abstract idea and saying that such a concept is not able to be patented generally for use on a computer.

“To be patentable, the claims will need to improve the function of the computer itself,” said Cindy Kernick, an intellectual property partner at Reed Smith. “Or make some other improvement in a technical field.”

Clarity on patents for non-abstract ideas, i.e. proprietary computer software, was not broached, leaving room for future decisions on computer-related programs that back the businesses of many current technology companies, including Google (GOOG), Facebook (FB) and Twitter (TWTR).

(Fortune’s Roger Parloff explained the complexity of the case and why it matters to the tech community, which provides clear context around the complicated nature of this decision.)

The invention that Alice Corp. patented was a computer-implemented method of lowering risk in foreign currency trades, essentially making sure that someone won’t default after half the trade is completed. The patent, which was approved in 1999, outlined a process for incorporating a third-party intermediary, an old concept, and then described how a general computer could operate the full transaction between the three parties.

“Alice has never built a computer system capable of settling transactions according to the claimed method, has never written instructions to program any computer to perform the method,” attorneys for CLS Bank International wrote. “And has never practiced any of the asserted claims.”

Parloff points out that CLS stops short of calling Alice a patent troll outright, but labels the company a non-practicing, “patent-assertion entity.”

The Supreme Court, taking into account the above claims, said it must distinguish between the “‘building blocks’ of human ingenuity” which are not patent-eligible from “those that integrate the building blocks into something more.” In the case of Alice Corp., the high court sided with CLS: Alice fails to transform its abstract idea of intermediated settlement into a patent-worthy invention.

“The expected result is that many patents suits now pending will be resolved on summary disposition under section 101,” said Kernick. “And, hopefully this will make some of the trolls stop and rethink the merits of their demands.”