Inventions that simply take an existing technique and programme it to run through a computer should not be patentable, the US Supreme Court has ruled.
The judgement could be a major set-back for so-called ‘patent trolls’ – companies that hoard patents without the aim of ever creating a product so that they can force other firms to pay license fees to develop the technology.
The case saw judges side with New York-based CLS Bank, ruling that the patents should not have been issued to Australian firm Alice Corporation’s in 1990 that attempted to patent the abstract idea of financial intermediation when carried out using a computer program.
In issuing its opinion, the Supreme Court’s Justice Thomas wrote: “We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”
The ruling comes after seven years of litigation between CLS and Alice, but could have much wider ramifications as it makes it clear that to obtain a patent, a company's idea must actually improve how a computer functions or make other technical advancements.
Alan Marquard, chief legal officer at CLS, said: “Alice’s attempt to patent the abstract idea of financial intermediation was rightfully rejected by the Supreme Court. Financial intermediation is critical to the safe and effective operation of all global markets, and we are proud to have led the fight against a very real risk to the economy and the financial ecosystem.”
Major technology firms, such as Google and Facebook, and even the Obama administration had urged the court to invalidate the Alice patent and offer guidance on how to stem the flow of vague software patents that can block other companies from innovation.
But other companies such as IBM, which has been awarded the most US patents for 21 years in a row, warned that too many new restrictions could undermine the legitimacy of existing intellectual property rights and discourage firms from investing in research.