Alice in Patentland…

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The United States Supreme CourtIf you have the idea of automating a business process and patent it, are you entitled to protection (i.e., licensing) if someone else tries to implement it? That is essentially what happened in Alice Corp. v. CLS Bank International.

Alice Corp. had applied and been granted a patent for implementing a computer-aided method of providing third-party transaction protection. This practice had been around for centuries simply known as escrow. Alice’s advancement here was to provide a computer-automated process to facilitate it. But, when CLS Bank International came into conflict with this patent, a lawsuit entailed.

When the Electronic Frontier Foundation, Institute of Electrical and Electronics Engineers, Intellectual Property Law Association of Chicago, Accenture Global Services, Google, Amazon, Microsoft, Adobe, HP, Netflix, the Free Software Foundation, IBM, Dillard’s, Hasbro and many other companies and organizations get involved in an issue before the Supreme Court, you know there is broad and general interest in the question being asked: “Whether claims to computer-implemented inventions-including claims to systems and machines, processes, and items of manufacture-are direct to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court”

In Alice Corp. v. CLS Bank International, the Supreme Court decided just yesterday that the patents made by Alice Corp. were, according to the Opinion of the Court written by Justice Thomas, invalid “… Because the claims are drawn to a patent-ineligible abstract idea…” In concurring, Justice Sotomayor, Justice Ginsburg and Justice Breyer also stated that “… any “claim that merely describes a method of doing business does not qualify as a ‘process’…”.

That sounds like a lot of hoopla over a simple opinion: that an idea in and of itself can’t be patented and equally a process of doing business can’t be patented. So, why all the interest from those many organizations? There were a number of ways that the Court could have ruled:

  • As they did, can an abstract idea be patented?, which potentially harms innovation so that companies like Alice, known as a “patent troll”, can simply patent an idea and wait for a company to come along and infringe upon it even though the didn’t implement the idea previously
  • Another line of argument was, can a business process be patented?, which the concurring opinions included as a reason to invalidate the patent
  • More interestingly, LinkedIn, Netflix and others argued, should any software be patented?, as this blocks innovation and scientific collaboration. This line of argument was not picked up by the court.
  • Finally, IBM argued that the idea was obvious, and therefore it should not be considered a valid patent. The court did not address this point either.

Ultimately, the majority of organizations agreed with this ruling. However, the court did not set and vast precedent in deciding this case by narrowly focusing in on the fact that this particular patent was based solely on an abstract idea and/or was merely a business process.

There is a still an ongoing battle ranging about the scope of software / computer patents. Some, like Twitter, LinkedIn and Netflix would argue that there should be no patents for software as that stifles innovation. Others like Google, Microsoft and Amazon that use the patent system extensively would argue that their extensive investments in innovation would be decimated without patent protection.

Stay tuned folks, more and more of these decisions are going to be decided over the next dozen years that has the chance to turn the patent world up-side down and dramatically change the balance of “innovative power”.