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Originally published Thursday, June 19, 2014 at 4:34 PM

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Transaction software not patent-eligible, high court rules

The verdict will be carefully read by those in the tech world for indications of how specific technical ideas need to be to become eligible for patent protection.


The New York Times

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WASHINGTON — The Supreme Court unanimously ruled Thursday that basic business methods may not be patented, even if computers are used to apply them.

The case involved a method for reducing the risk that the parties to a transaction will not pay what they owe. Writing for the court, Justice Clarence Thomas said that was “a patent-ineligible abstract idea.”

“Merely requiring generic computer implementation,” he added, “fails to transform that abstract idea into a patent-eligible invention.”

The case had been closely watched by the software industry. But the ruling appeared to be modest and in line with earlier decisions of the court that were wary of stifling innovation by extending patent protection to business methods and natural phenomena.

Still, it will be carefully read by those in the tech world for indications of how specific technical ideas need to be to become eligible for patent protection.

Patent claims over the way that ideas are incorporated into computers, cellphones and other devices have become a challenge for many high-tech companies.

Many of those companies have interests that tug in opposite directions. They tend to hold large portfolios of valuable patents and want to protect them.

But they must also contend with “patent trolls,” companies that have obtained patents on sometimes vague concepts and that are more active in the courthouse than on the production line.

The patents at issue in Thursday’s case were owned by the Alice Corp., which developed a method for mitigating settlement risks among multiple parties.

The patents were challenged by CLS Bank International, which says it clears $5 trillion in foreign-exchange transactions a day using methods to ensure that both sides performed. Alice Corp.’s patents, the bank said, merely recited “the fundamental economic concept of intermediated settlement of escrow.”

A trial court invalidated Alice’s patents, saying they recited only abstract concepts.

That decision was effectively affirmed by the U.S. Court of Appeals for the Federal Circuit, a specialized court in Washington that hears patent disputes. But the decision was badly fractured, with seven opinions, none of which commanded a majority.

The Supreme Court affirmed that judgment in the Alice Corp. v. CLS Bank International, No. 13-298, saying Alice’s idea was a fundamental economic practice and “a building block of the modern economy.” The use of a computer added nothing, Thomas wrote.

“Stating an abstract idea while adding the words ‘apply it’ is not enough for patent eligibility,” he wrote, quoting an earlier decision.

In recent rulings, the Supreme Court has been skeptical of protecting discoveries and ideas even at that threshold stage if doing so would hamper innovation.

In 2010, the court ruled that a method of hedging risk was not eligible to be patented. In 2012, it said the same thing about correlations between drug dosages and treatment.



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