Supreme Court weighs software patents

The Supreme Court did not seem particularly impressed Monday with the computerized trading “invention” for which Alice Corp. received a patent in the early 1990s.

Justice Anthony M. Kennedy guessed that a group of ­computer-savvy folks “sitting around in a coffee shop in Silicon Valley could do this over a weekend.”

Justice Stephen G. Breyer thought of an ancient accountant with an abacus telling King Tut when his gold was about to run out or Breyer’s own mother seizing the checkbook when her son was writing checks for more money than he had in his bank account.

In other words, the justices seemed to think the Australia-based company had received a patent simply for invoking old concepts about how to keep a person or entity solvent and then saying that using a computer to keep track of the transactions would help.

But there are broader issues at play in the case that could affect hundreds of thousands of software patents. And the justices were not nearly as clearabout what rules should govern those, or whether the court needed to use this case to spell out those rules.

Washington lawyer Carter Phillips, representing Alice Corp., warned of the consequences of choosing wrongly. The court, he said, could “inherently declare, and in one fell swoop, hundreds of thousands of patents invalid, and the consequences of that it seems to me are utterly unknowable.”

The case has drawn the attention of the nation’s biggest technology companies. Some, such as Microsoft and IBM, are concerned about the loss of existing patents. Others, including Google and Facebook, worry that business process patents are too easily awarded, thwart innovation and launch waves of unproductive litigation.

Patents are awarded for inventing any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” But over the years, courts have created three exceptions. Those are for “laws of nature, physical phenomena, and abstract ideas.”

Alice and CLS Bank International are in litigation over
Alice’s patents for a computer-
implemented method of using a third party to ensure that foreign currency transactions proceed smoothly and protect the parties. CLS developed a similar program.

Mark Perry, a Washington lawyer representing CLS, said the court’s recent jurisprudence should settle the matter. In one case, the court said that basic economic principles are abstract ideas and in another it said that simply running such a principle on a computer is not a “patentable application of that principle.”

Phillips struggled to convince the justices that Alice’s patents covered more than that, although he acknowledged that “trying to use language to describe these things is not all that easy.”

He said the company’s patents protect everyone in massive, multiparty transactions in “which you need to deal with difficulties that exist at different time zones simultaneously and to do it with a computer so that you not only take them on chronologically, deal with them sequentially, based on the kind of software analysis that the patent specifically describes by function.”

Breyer seemed to be the justice most interested in trying to find a broader solution. As it is, he said companies are not in “competition on price, service and better production” but on “who has the best patent lawyer.”

Solicitor General Donald B. Verrilli Jr., representing the Obama administration, also asked the court for a broader ruling. He said it could find against Alice just by applying its recent decisions, as Perry indicated.

But he said the court should go beyond that and say that software was eligible for patents only when it provides an “improvement in computing technology or an innovation that uses computing technology to improve other technological functions.”

Justice Ruth Bader Ginsburg noted that other interested parties have said the government’s stiff test would “extinguish business method patents and make all software ineligible for patent protection.”

Verrilli said that was an exaggeration. He said it was obvious that lower courts need more specific guidance from the justices. The U.S. Court of Appeals for the Federal Circuit, for instance, agreed with a district judge that Alice’s patents were invalid, but issued six separate opinions offering different rationales.

Chief Justice John G. Roberts Jr., however, noted that the government’s test would require a judge to consider at least six factors.

“I’m just doubtful that that’s going to bring about greater clarity and certainty,” Roberts said.

The case is Alice Corp. v. CLS Bank International.

Robert Barnes has been a Washington Post reporter and editor since 1987. He has covered the Supreme Court since November 2006.
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