In a unanimous, highly anticipated decision yesterday, the United States Supreme Court ruled in Alice Corp. v. CLS Bank that adding a computer implementation to an abstract idea does not make it patentable. The ruling could stave off future grants of wide-ranging patents commonly used by "patent trolls" to sue large numbers of businesses for infringement. It could also be used to invalidate similar, existing patents.
Here's a brief description of the patent at issue in the case, courtesy of the Electronic Frontier Foundation:
Alice Corp.'s patent claimed a form of escrowing that was well known. Called an "intermediated settlement," it allowed a third party to act as an intermediary by creating "shadow accounts" for parties, and only allowing transactions to go through if the "shadow account" showed the party had enough money. Oh—and it was done with a computer.
The plaintiff in the case, CLS Bank, had sued Alice Corporation, arguing that "the patent claims at issue [were] invalid, unenforceable, or not infringed." Alice Corp. then counter-sued for infringement, according to the Supreme Court's published ruling.
To reach its ruling, the Court determined that "intermediated settlement" is a "fundamental economic practice long prevalent in our system of commerce," drawing on its ruling in another patent case, Bilski v. Kappos, to make that determination. Both the patent in Bilski and the patent in this case are "abstract ideas" that cannot be patented, as they run afoul of Title 35 of the United States Code, Section 101, according to the Court. The critical determination in this case, though, was the Court's finding that implementing the intermediated settlement procedure on a computer "fail[s] to transform that abstract idea into a patent-eligible invention."
The decision stopped short of invalidating software patents in general. According to Ars Technica, Microsoft and IBM won't suffer as a result of the ruling. Both companies hold huge numbers of software patents and filed amicus briefs in the case. The Court also didn't define precisely what an "abstract idea" might be in its ruling, so there's not a clear framework for establishing whether a patent is affected by this decision. EE Times spoke to patent attorney Jeffery Frazier, who commented that "people that draft applications are going to think around these lines and include language that sounds like there's an improvement made." For its part, the EFF believes that "many thousands of software patents—particularly the vague and overbroad patents so beloved by patent trolls—should be struck down under this standard."