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Supreme Court Skeptical During Software Patent Arguments

Justices raise questions about the patent at the heart of a closely watched case

Katherine Welles /

Supreme Court justices jumped into the debate about how software patents are enforced Monday, but their questioning suggested a desire to avoid any massive changes to how courts should examine infringement cases.

On Monday, the court heard arguments in a case that could have far-reaching implications for the software industry, as the justices took up the issue of whether the Patent Act authorizes the granting of patents on software based on abstract ideas.

Software developers and other companies are closely watching the case because if the court were to broadly strike down the patentability of software, it could have a significant impact on companies like Microsoft or Google, which rely on such patent protections for licensing revenue.

The justices heard an appeal by Australian-based Alice Corp., which sued financial institution CLS Bank International for infringing its software patents, which cover a method of settling foreign currency or other financial trades. The software is designed to reduce the risk of non-payments.

CLS Bank and its supporters, including the Justice Department, argue that the technology isn’t innovative since it’s basically the same idea as operating a form of escrow account.

A federal appeals court agreed with CLS and tossed out the infringement case, but a full panel of judges was divided on interpretation of patent law. The 10-judge panel managed to generate six separate opinions.

The Supreme Court became involved since its last effort to clarify how software patents should be considered — a 2010 decision in the Bilski v. Kappos case — essentially left everyone more confused than before.

During an hour-long hearing Monday, several justices questioned how Alice Corp.’s patent wasn’t just a computer version of an abstract idea, which isn’t patentable. “In what particular way, other than saying do it through a computer, is this something new and not function?” asked Justice Sonia Sotomayor.

Justice Anthony Kennedy questioned whether a bunch of engineering students couldn’t write computer code in one weekend to do what Alice Corp.’s patent outlines. Alice’s lawyer responded that they probably could, but that wasn’t the point.

Two of the conservative justices, Justice Antonin Scalia and Chief Justice John Roberts, were somewhat more supportive of Alice’s claims. Roberts said the diagram for Alice’s patent looked pretty complicated with “a lot of arrows” pointing in different directions.

Scalia suggested that Alice’s idea might not be that abstract, making a comparison to the cotton gin. “Was the cotton gin not an invention because it just means you’re doing though a machine what people used to do by hand?” he asked.

The court is expected to release a decision on the case in June.

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