U.S. Supreme Court

SCOTUS considers limits on software patents; will case affect patent trolls?

The U.S. Supreme Court on Monday considered what kind of software is eligible for a patent in a dispute over a computerized escrow mechanism.

Several justices appeared unimpressed with the patents held by the Alice Corp., report the New York Times, the Washington Post and the Los Angeles Times. A case preview by Ars Technica cites the view of critics: The company’s patents on a computerized method for foreign currency transactions “describe how anyone performing an exchange of goods with an unknown party would proceed: find a trusted third party.”

Justice Stephen G. Breyer said Alice’s patents seemed to be based on a method used by his mother to decide when he was overspending: She “used to look at my checkbook, and when she saw that in fact I had written more checks than I had in the account, she would grab it and say ‘Stop!’ ” he said.

Justice Anthony M. Kennedy was similarly skeptical when he suggested a group of computer geeks or college-engineering students “sitting around in a coffee shop in Silicon Valley could do this over a weekend.”

According to the Times, the justices are considering the threshold question whether Alice Corp.’s ideas were eligible for a patent. Laws of nature, natural phenomena and abstract ideas are not eligible, the court has said. Arguing for Alice Corp., Carter Phillips said the patents covered more than abstract principles and the court should use “a coarse filter” when looking at the initial threshold for patent eligibility.

Alice Corp. is half owned by National Australia Bank, Ars Technica says. Its patent is being challenged by CLS Bank International. “While many of the lawyers briefing the case, including CLS Bank’s attorneys, are too polite to say it,” Ars Technica says, “Alice Corporation fits the classic model of a ‘patent troll.’ Despite a website with language about wanting to launch ‘an innovative form of derivatives market,’ the company appears to have never created any product. By its own admission, it has been focused on its lawsuit since 2007.”

According to Ars Technica, “Practically no observers expect Alice Corp. to keep its four patents, but the question of how many other patents get lassoed into [the Supreme Court’s] decision will resonate for years to come. Some would like to see the Supreme Court end Alice’s patents with sniper-like precision, touching no other patent; others are eager for a pronouncement that would deal some broader harm to the patent troll business model.”

The case is Alice Corporation v. CLS Bank International.

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