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U.S. top court issues narrow ruling on software patents

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Thursday modestly cut back on software patents by ruling that simply implementing an abstract idea using a computer does not make an invention eligible to be patented.

On a 9-0 vote, the court ruled for CLS Bank International, which challenged patents held by Australia-based Alice Corporation Pty Ltd for a computer system that facilitates financial transactions. The court added some clarity to a confused area of the law concerning when software can be patented but did not provide a definitive test on when software can be patented as some had hoped.

The ruling left open questions about under what circumstances the use of a computer adds enough to the idea to make it patent eligible.

At a minimum, the ruling is likely to help tech companies fend off lawsuits filed by "patent trolls," defined as companies that hold patents only for the purpose of suing firms seeking to develop new products.

"It's going to clear away a lot of illegitimate claims pretty quickly," said Andrew Pincus, a lawyer with the Mayer Brown law firm who filed a brief on behalf of a technology trade group.

The ruling in some ways mirrors a 2010 case, Bilski v. Kappos, in which the court was expected to offer guidance on business method patents but eventually issued a relatively narrow 9-0 decision.

In Thursday's majority opinion, Justice Clarence Thomas wrote that the outcome was determined by two of the court's recent patent rulings.

"We hold that the claims at issue are drawn to the abstract idea of intermediated settlement and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention," Thomas wrote.

The legal question boiled down to how innovative an invention should be to receive legal protection.

The U.S. Patent Act states that anyone who "invents or discovers a new and useful process, machine, manufacture, or composition of matter," or an improvement of an existing one, can get a patent. An invention related to an abstract idea can be patented, but it must include a way of applying the idea.

Google Inc , Dell Inc , Verizon Communications Inc, and Microsoft Corp were among the companies that filed legal papers weighing in on the issue.

Companies differ over what kind of eligibility threshold they would prefer. Those that often get sued for patent infringement, such as Google, favor a tighter definition. Those that want to protect their own patents, such as IBM Corp, would prefer that most software be patent eligible.

In May 2013, the U.S. Court of Appeals for the Federal Circuit ruled for CLS but the judges were split 5-5 on which legal test to adopt.

The case is Alice Corp v. CLS Bank, U.S. Supreme Court, No.13-298

(Reporting by Lawrence Hurley; Editing by Howard Goller and Grant McCool)

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