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Will Alice Ruling Make Patent Prosecution Tougher and More Expensive?

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The process of translating an existing idea, method, or task into a piece of computer software is not, in and of itself, a valid basis for a patent, the Supreme Court of the United States has ruled in a decision that has clear ramifications for anyone in the midst of patent prosecution for either software or other computer-based applications.

In a unanimous decision, the Supreme Court on June 19, 2014, invalidated the patents of Alice Corporation, an Australian firm, which effectively claimed ownership over the use of any software-based intermediary to handle escrow functions in certain types of financial transactions.

The decision has sparked spirited debate in the intellectual property industry, as patent attorneys, corporate counsel for IP-driven companies and other intellectual property observers consider the implications.

One possibility is that anyone who is in the midst of drafting a patent application for software and other computer-based applications just found their prosecution strategies turned on end—and their costs rising substantially, according to patent attorney Gene Quinn, founder of IPWatchdog, Inc.

“This doesn’t mean that moving forward software won’t be patentable, it just means that getting a software patent will be much more difficult than it ever has been,” Quinn wrote in reaction to the Alice ruling, and continued that “getting a patent for software has just become much more expensive and time-consuming.”

To successfully prove originality, attorneys who are drafting patent applications now will have to be far more detailed when it comes to software patents, Quinn argues, and prosecution strategies will take longer because of it.

“A 50-page patent application will now become a 75- to 100-page patent application,” he wrote. “A 100-page patent application will now need to become a 150- to 200-page patent application. That will raise costs substantially. It will also drive innovation underground because a patent will be unaffordable to many.”

In Alice v. CLS Bank, the Court found that the patents’ claims relied too much on the underlying abstract financial concept of escrow for the mere presence of a software component to qualify as a patentable invention.

“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,” Justice Clarence Thomas wrote.

In the more extensive of two opinions issued by the Court, Thomas wrote that Alice Corporation’s erstwhile patents did “no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.”

On the basis of those patents, Alice Corporation in 2007 filed an infringement lawsuit against U.S.-based CLS Bank, which mediates trillions of dollars worth of foreign exchange transactions each day and functions as part of the global financial infrastructure.

Not everyone agreed that the ruling against Alice would substantially harm patent holders or applicants. Technology industry observers and intellectual property experts were divided about both the ruling’s importance and its likely impacts on the software industry.

Technology titans Apple, IBM, and Microsoft are members of The Software Alliance, an industry trade group whose president and CEO, Victoria Espinel, called the ruling “a victory for innovation.”

“The opinion makes clear that real software inventions are patentable under U.S. law and that merely connecting an abstract idea to a computer doesn’t make it patentable,” Espinel said.

Todd Dickinson, executive director of the American Intellectual Property Law Association, disagreed that the Alice ruling represented any kind of tectonic shift in broader debate around the validity of software patents. He told the Washington Post technology reporter Brian Fung that the SCOTUS decision does not “seem to move the needle much either way.”

One prominent patent attorney, however, saw the ruling as a potential message from the Supreme Court to the U.S. Patent and Trademark Office.

Andrew Updegrove of the firm Gesmer Updegrove told ZDNet that the court may have wanted to  “send a message to the PTO to quit issuing weak patents, and to reinforce its agreement with the administration, and many in the industry, that bad patents are hurting the economy and innovation.”



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