You can patent a snow plow or a new combustion engine. You cannot, however, patent an abstract idea, such as using an intermediary for escrow purposes in a financial transaction.
But wait, what if you write a computer program that makes that abstract idea a reality? Does translating an idea into code turn it from an unpatentable abstraction to a patentable practical invention?
That's the issue in Alice Corporation v. CLS Bank. Alice's founder wrote a program that calculates the obligations of parties entering into a currency exchange transaction, which can take days to complete. The program basically acts as an escrow service.
Federal Circuit: %^&*#! (Invalidated the Patent)
Perhaps the most compelling reason for the Supreme Court's grant was the format of the Federal Circuit's opinion(s). One hundred and thirty five pages. A one paragraph per curium, plus a concurrence, three separate partial concurrence/dissents, another full dissent, and Judge Rader's separate "additional reflections" on life, liberty, and the pursuit of patent clarity, via the statute.
If none of that makes any sense, well, it shouldn't. The Federal Circuit's insanely-fractured opinion, which invalidated Alice's patent, clarified absolutely nothing. The muddled voices of seven opinions left little to no guidance on software patents. The Supreme Court had no choice, unless it wanted trial judges' heads to explode during software patent disputes.
What's At Stake?
Innovation, of course. And money.
Judge Kimberly Moore, in one of the many Federal Circuit's separate opinions, worried about the implications of applying abstract ideas exception to patent law to Alice's software:
"And let's be clear: If all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business-method, financial-system, and software patents as well as many computer implemented and telecommunications patents."
There are a lot of companies, creating a lot of programs, that serve valuable purposes that could benefit from patent protection. Protection leads to more money, which creates incentive to invent.
Then again, software patents can lead to absurd results, like Ultramercial v. WildTangent, a case denied review by the Supreme Court earlier this year. The patented idea? Playing an advertisement before displaying copyrighted content. Somehow, that much more abstract (and obvious) patent was upheld.
What's the Law?
The question of what is patentable is controlled by a one-line statute, 35 U.S.C. § 101:
"Whoever 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."
There's the rub. Is software a "new and useful process?" It's certainly not a "machine, manufacture, or composition of matter."
In 1972, the Supreme Court held that a simple algorithm, which converted binary-coded decimals to binary numerals, was not a process worthy of patent protection, as it was simply abstract mathematics, and "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." The court did, however, leave the door open for more complex software.
Since then, the Court, and the Federal Circuit, have issued opinions that have done little to clarify the situation.
- It's Game Time: Supreme Court to Address Abstract Software Patents (Electronic Frontier Foundation)
- Snippets: Online Sales Tax Cert. Denial, Frequent Flyer Arguments (FindLaw's U.S. Supreme Court Blog)
- Liberty U's Religious Objection to Employer Mandate Goes Unheard (FindLaw's U.S. Supreme Court Blog)