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Supreme Court rules against company on patents

First Published      Last Updated Jun 19 2014 04:29 pm

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 in Silicon Valley 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.

Thomas indicated that the decision posed no threat to the concept of software patents.

"There is no dispute," he wrote, "that many computer-implemented claims are formally addressed to patent-eligible subject matter."

Many technology 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., an Australian company that developed a method for mitigating settlement risks among multiple parties. In its Supreme Court brief, the company said the method was eligible to be patented largely because it involved shadow records updated in real time that "require a substantial and meaningful role for the computer."

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.

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.