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The U.S. Supreme Court’s long-anticipated decision on an important software patent case turned out to be something less than many hoped, but it is still important.
The Supreme Court decided on June 19 that the patent for computer software designed to implement a settlement risk protection method was not patentable. As such, the case didn’t strike down all software patents, nor did it eliminate business method patents.
However, the Supreme Court determined non-patentable methods didn’t become patentable when they were turned into software. In this case, the Supreme Court found that the idea of protecting one’s self from risk by using a third-party (for example, an escrow) was both an abstract idea and not a new idea. Patent law explicitly excludes patents for abstract ideas, and it excludes patenting things that existed before the patent was filed.
In this case (Alice Corp. v. CLS Bank), the bank was using a computerized escrow system to mitigate risk during money transfers. Alice Corp. sued the bank for infringement. The Supreme Court decided unanimously that the patent was not valid.
Justice Clarence Thomas was very clear in writing the court’s opinion on the case. “We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”
Three justices wrote concurring opinions, saying, in effect, that business process patents shouldn’t be allowed at all.
But the justices made it clear that their decision did not mean that software couldn’t be patented, nor that methods couldn’t be patented.
“It’s a good decision. It does positive things, but it’s narrow,” said Ed Black, president and CEO of the Computer and Communications Industry Association. The CCIA filed a brief in support of CLS Bank in this case. “It reaffirms some core principles but it doesn’t reach out to expand with greater clarity some of the problems.”
One major disappointment for many is that the Supreme Court did little to end the abuses of patent trolls, companies that hold patents for the primary purpose of suing alleged infringers. Many of the patents held by those companies are of poor quality, and in some cases, likely are already invalid.
While the decision may have invalidated some of the poor quality patents that the trolls are asserting, that’s not likely to stop their extortion efforts. After all, the trolls depend on companies not wanting to challenge their patents because of the cost, not because of the quality of the patent. Right now, those costs are still very high.
Black said the June 19 decision will help curb some patent troll abuses if only because it will make fighting their patents easier.
Supreme Court Narrowly Limits Business Method Software Patents
“This should embolden or enable some people who are targets of trolls,” Black noted. “The problem is that it doesn’t matter as much as it should whether the patent is good.”
Black explained that, in many cases, businesses would rather pay off a troll instead of fighting a patent infringement suit, if only because of the expense of defending against an infringement suit. He noted that trolls will likely keep sending their demand letters, regardless of the decision.
“It’s going to have its greatest impact on some business method patents. This case will make it harder to make a technological case,” said Gregory Stobbs, a patent lawyer with Harness, Dickey and Pierce in Troy, Mich. Stobbs noted that the Supreme Court looked at the Alice patent as a whole, rather than strictly looking at whether it was an abstract idea or, for that matter, a new idea. He said that in addition to looking at the patent as a new idea, the Supreme Court considered novelty and obviousness as criteria.
While the decision didn’t invalidate software patents, especially software for business methods, “it certainly doesn’t help software patents much,” said Case Collard, an IP litigator for the law firm of Dorsey and Whitney in Denver. “Businesses are going to have to struggle. They have to have a novel piece.”
So if the Alice v. CLS decision doesn’t invalidate software patents or business process patents, what did it do? The opinion shows that the Supreme Court’s goal was to make it clear that a patent that’s overly broad, extremely vague or that makes claims about ideas that wouldn’t normally be patentable doesn’t become patentable just because it’s encoded in software on a generic computer.
“If you do apply that methodology to computer claims, then it raises questions about implementing ideas on a generic computer,” said John Murphy, who practices intellectual property litigation at Baker Hostetler in Philadelphia.
“The Supreme Court leaves a big door open,” he said. “Part of the reason this claim failed is because it was simply implementing this in a generic sense. They made the observation it did not improve the operation of the computer itself, or any other technology.” Murphy also noted that had the patent claimed to improve the computer or its operation in some way, the decision might have been different.
Murphy said that because the decision was written narrowly, it does not prejudge some cases. “But it does prejudge some business method cases,” he said. “If the invention is about something that just happens to be on a computer, that’s not a good position.”