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SCOTUS Grants Review: Are Software Patents Eligible for Protection?

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By Gabriella Khorasanee, JD on December 11, 2013 2:55 PM

Last week the Supreme Court granted certiorari in a patent case that will have wide-reaching ramifications across the nation, across industries. The case, Alice Corporation Pty. Ltd. v. CLS Bank International, deals with a very basic issue: is computer software patent-eligible under the Patent Act?

Section 101 of the Patent Act allows for the patent eligibility of "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." The question then becomes, is computer software a "new and useful process?" Companies like Facebook, JPMorgan and Google think that patent-eligibility for computer software is "too lax," while Microsoft and Oracle think "limiting protection for genuine innovation could hurt the nation's economy," according to Bloomberg.

Federal Circuit En Banc Opinion

In Alice Corp., the company's founder developed what amounts to a digital escrow service. CLS Bank sued Alice Corp., claiming the patent was unenforceable, and Alice countered claiming patent infringement, according to SCOTUSblog. A district judge nullified the patent, a Federal Circuit panel reversed, and the Federal Circuit in an en banc opinion ultimately ruled the patent was invalid, reports SCOTUSblog, but not without great disagreement.

In a 135-page decision, the Federal Circuit could not agree on a single approach setting the standards for determining patent-eligibility for computer software. This left the Supreme Court with no other choice than to grant certiorari to clarify the standard.

Demonstrating the import of this case, Judge Kimberly Moore stated in her dissenting opinion:

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.

SCOTUS Review

Without further statutory guidance, the only Supreme Court case to squarely address whether software is patentable is probably a bit out of date. In 1972, the Supreme Court held that an algorithm that converted binary decimals to binary numerals was "merely a series of mathematical calculations ... and does not constitute a patentable 'process'" as envisioned by the Patent Act. However, we've come a long way in computer software, and it's unknown how much of an impact this case will have in the Supreme Court's review.

The Court will hear arguments in the spring, in March or April, and rule on the matter in July, according to Bloomberg.

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