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US Supreme Court To Rule on Validity of Software Patents
US Supreme Court To Rule on Validity of Software Patents

By Jennifer LeClaire
December 6, 2013 1:35PM

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Microsoft and Oracle stand on one side of the Supreme Court software patent case, arguing that limiting software patents on authentic technology innovations could damage the nation's economy. But Google and Facebook argue against the software patents in their current form. They believe the current patent system opens the door to unjustified lawsuits.
 


The U.S. Supreme Court has decided it will rule on whether or not some kinds of software can be patented. The case has caused strife in the technology industry and industry watchers say the high court's decision could have a ripple effects across the U.S. economy.

According to Bloomberg News, justices will hear arguments on a patented system for limiting the risk that one party to a derivative trade won't follow through on its obligations. Reuters, in turn, reported that a federal appeals court struggled to adopt a test judges could use to review software patent claims, with various judges reaching different conclusions.

The lines are clearly drawn, with technology heavy hitters taking hard stances on both sides of the issue. Microsoft and Oracle stand on one side of the patent case, arguing that limiting software patents on authentic technology innovations could damage the nation's economy. But Google and Facebook argue against the patents in their current form. They believe the current patent system opens the door to unjustified lawsuits.

Understanding the Case

The case is Alice Corp. v. CLS Bank, U.S. Supreme Court, No. 13-298. The Supreme Court is likely to hear oral arguments in March and could issue a ruling as early as the end of June.

Here's the background: Alice Corp. owns four patents. All of them deal with how to use an escrow system to reduce the risk in settling financial transactions. CLS Bank sued Alice in U.S. District Court, seeking a declaratory judgment of noninfringement, invalidity, and unenforceability with regard to Alice's patents. Alice, on the other hand, claimed patent infringement.

A highly divided federal court ruled in CLS's favor. The court reasoned that Alice's method, system and media claims were too abstract. Specifically, the court said it would "preempt the use of the abstract concept…on any computer, which is, as a practical matter, how these processes are likely to be applied."

What's at Stake?

We turned to Rob Enderle, principal analyst at the Enderle Group, to get his take on the pivotal case. He told us he's not going to speculate on how the Supreme Court could rule, but he noted a widespread feeling that there is too much intellectual-property litigation. Indeed, according to patent scholar James Bessen, patent troll litigation cost the U.S. economy $29 billion in 2011.

"This is going to be a divisive decision. The ruling will have a major impact on the industry regardless of which way it goes," Enderle said. "If the Supreme Court invalidates the patents, then it will open the industry up but it may very well shift an awful lot of the business overseas. If the Supreme Court validates the patents then Google is in for a world of hurt because they've never really believed in patents, and it will be more of the status quo."
 

Tell Us What You Think
Comment:

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Ed Rose:

Posted: 2014-01-28 @ 6:35am PT
Do not agree with three years limitation, since took five years research to bring together and a further 13 years to get through the USPTO system of checks and office actions from other companies. GIF covered a method, so what if others surpassed it, that's life and why continued Patent filings happen.

ThePatentTroll:

Posted: 2013-12-07 @ 11:53am PT
The patent system is less than perfect and obviously fails the original goal to encourage innovation for the overall benefit of society. The tradeoff of an inherently bad short-term monopoly in exchange for inherently good long-term public benefit only works if the monopoly life is much shorter than the useful invention life. An easy fix would be to limit software pantents to 3 years validity, which is justifiable because of the faster innovation cycle. A telling example is the infamous GIF patent: by the time it expired, the technology had long become obsolete, making it, on balance, a very bad deal for society.



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