Supreme Court to Rule on Software Patents

The Supreme Court heard arguments Monday on a case that may see the nation’s highest court rule on whether software is eligible for patent protection.  The suit before them involves the rights to software currently used in the foreign-exchange market. The continuous linked settlement (CLS) software is an automated settlement service that ensures none of the countless dollars transferred daily on the foreign exchange market are lost. CLS is owned by the market’s member banks and is considered an essential part of the financial system, having spent years in development and responsible for thousands of transactions per day.

The suit against CLS was brought by the Australian-based Alice Corporation, which claims to hold patents on similar software. In fact, the patents the company owns are quite broad, covering the general concept of financial settlement through a computer system. The possibility of a ruling in Alice Corporation’s favor raises concerns that any sector of the financial market using settlement software could be left vulnerable to the threat of lawsuit and the possibility of hefty royalty payments. Critics claim that that Alice Corporation is merely a “patent troll”, looking to make money off a product they’ll never develop or use.  

The implications of a Supreme Court ruling on the matter of software patents have rallied advocates on either side of the issue to action.  Companies such as Microsoft, Hewlett-Packard, and Google have filed amicus(“friend of the court”) briefs, noting the increased difficulty larger corporations might face from patent trolls should Alice Corporation prevail.  The U.S. Patent and Trademark Office weighed in, saying that Alice Corporation’s patents are too vague and broad, and the means to manage financial risk have traditionally been beyond patent law. Entities such as the Electronic Frontier Foundation and a joint filing from the Software Freedom Law Center on behalf of the Open Source Initiative and Free Software Foundation have all voiced support for upholding Alice Corporation’s patents.

Previous court rulings on whether software is patentable have left the issue muddled. In a series of rulings from 1972 to 1981 the Supreme Court determined that algorithms (a set of instructions for a computer) were not patentable unless tied to a specific machine or physical process. And while these rulings are considered authoritative, many judges have broken with the high court in their own decisions on related cases. With the current ubiquity of software and software applications, there is pressing need for a clear ruling moving forward, lest the burden fall to pastoral tribunals.