Business Forum: High court to address software patents

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With a key Supreme Court case looming, 2014 should be a landmark year for the important question of whether software can be patented and, if so, in what situations.

The topic of software patents has been a highly contested issue in the past year. Congress, the White House, several courts and industry representatives have debated the costs and benefits of software patents to American industry. However, one thing that most parties agree upon is that the uncertain legal framework governing software patents is not helping anyone.

Many businesses are investing a significant amount of time and money in software patents. Pittsburgh-based companies and inventors received over 250 patents for software inventions in 2013.

The upcoming case -- commonly known as Alice Corp. v. CLS Bank International -- will be an appeal of a May 2013 decision by the U.S. Court of Appeals for the Federal Circuit. In that ruling, certain patents held by Australia's Alice Corp. were ruled invalid. The patents covered various methods and systems for managing risk in financial transactions.

The court found the patents' claims to merely cover an "abstract idea" and thus were not eligible for patenting. However, the opinion gave no clear guidance as to why the claims were not patent-eligible, nor explain what types of software claims would be patent-eligible.

Although a majority of the Federal Circuit judges agreed with the result, they did not agree upon any particular reasoning or on the potential scope of the result. In fact, the published decision included seven different opinions. Half of the judges found some, but not all, of the patents' claims to be patent-eligible. Three judges found all of the claims to be eligible for patenting.

In seeking a Supreme Court appeal, Alice Corp. said, "Given the importance of computers and software to our nation's economy, the time is ripe for the court to address these issues. The court need look no further than the Federal Circuit's inability to make a decision concerning the computer system claims, and the hundreds of pages of opinions proposing approaches on which a majority of the court could not agree to recognize the enormous confusion that exists."

Alice Corp.'s petition asked a single question: "Whether claims to computer-implemented inventions ... are directed to patent-eligible subject matter" within the meaning of the U.S. Code.

This question is quite broad, especially since the Federal Circuit has issued several decisions saying that software can be patented. In addition, the Supreme Court already answered this question in the affirmative in its 2010 Bilski v. Kappos decision (which involved Pittsburgh's WeatherWise USA, a provider of customized consumer energy products).

In the Bilski decision, the court said, "The [federal patent] statute itself acknowledges that there may be business method patents."

Thus, it is likely that the court will quickly dispose of Alice Corp.'s "whether" question and instead move to the more critical question of "when" computer-eligible inventions will be patent-eligible.

One of the dissenting judges in the Federal Circuit's decision said that if the case's result is upheld, then "this case is the death of hundreds of thousands of business method, financial system and software patents."

While companies who have been targeted with patent infringement suits may appreciate this result, others who are investing in new software technologies and want to protect them with patents will disagree. It will be critical to get an opinion that provides meaningful guidance for future patent applicants and protections for the technology community.

Jim Singer (jsinger@foxrothschild.com) is a partner and registered patent attorney with Fox Rothschild LLP in Pittsburgh and publishes its IP Spotlight blog.


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