Can You Patent Software? Supreme Court Will Decide

On March 31, 2014, the United States Supreme Court heard arguments regarding whether computer-implemented inventions are patent eligible. The case, Alice Corp. v. CLS Bank International, centers on Section 101 of the Patent Act which provides that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” It has been established that the creation cannot be an abstract idea or product of nature.

The district court held the computer program patents were an un-patentable abstract idea that failed to meet the requirements of §101, and thus were invalid. The U.S. Court of Appeals for the Federal Circuit rendered a widely split decision reversing the district court holding that the method claims were patent eligible. The en banc Federal Circuit found the tool at issue ineligible for a patent, but a standard for making such determinations could not be agreed upon.

Alice is the owner of patents covering a computer-implemented method for reducing risk in financial transactions. Specifically, because transactions for the exchange of currency or financial goods are often delayed, the program develops a settlement arrangement to decide which party is obligated to deliver. The idea is to eliminate the risk of one party failing to perform after the other party has already performed.

CLS filed a declaratory judgment action against Alice alleging the patents are not valid under Section 101 because the program is an abstract idea. Alice responded with its own lawsuit, claiming infringement of its patent rights.

The Federal Circuit was unable to agree on a standard for determining what constitutes an abstract idea as applied to an invention implemented by a computer. If the Supreme Court defines abstract idea as applied to intellectual property, it could significantly impact our country’s largest companies and even the economy. Patent-eligibility will directly affect product innovation, technology and patent practices.