US Supreme Court To Review Software Patents
In what may shape up to be a historic decision, the US Supreme Court agreed on December 6th to hear a test case that may have profound implications for protection of software patents. The case revolves around a patented system that reduces the risk that one party will not follow through on its obligations when executing a derivative trade – which has important implications in financial markets. However, the more fundamental question is what is the standard of eligibility for software patents – what criteria does a software invention have to meet for it to be patentable?
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On one side of the argument lie Google and Facebook, who argue that patents are granted too easily, and are too broad in scope. The companies say that this leaves Internet firms open to what are essentially unwarranted lawsuits for patent violations, which stifles innovations. On the other side are Microsoft and Oracle, who head up a group that claims that if genuine innovation isn’t protected, then there will be no incentive to invest in it. Not only will large software companies be reluctant to pursue innovation, but also venture capitalists could be more cautious when putting their money into software startups. At the same time, VCs like Rick Bolander Gabriel Venture Partners co-founder could see their startups face patent lawsuits, which could stifle innovation.
The case has already caused controversy at the appeal court level. The US Court of Appeals wasn’t able to reach a majority opinion – a majority believed that the underlying ideas in the case weren’t patentable, but there was an even split on whether the system to implement those ideas could be patented. In the end, the court produced six separate rulings – one from each judge – that together have the potential of calling hundreds of thousands of existing software patents into question.
It is interesting that the Supreme Court has agreed to rule on the standard of eligibility for software patents, given the fact that they have not explicitly stated in the past that software was patentable at all. Instead, they have made general rulings that place some limits on patentability, without being specific about what would prevent a software invention from being patented. The issue of such a standard is becoming increasingly urgent, since there are a number of significant software patent cases currently in district courts – and the volume is increasing rapidly. Many experts believe that the current picture on eligibility is far from clear, and therefore a definitive ruling is badly needed.
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Getting this clarity is likely to have a profound effect on the enforcement of software patents going forward – and on the American economy in general. Establishing a patent would make it much less expensive and quicker to challenge a patent on the grounds that it isn’t eligible for protection. In fact, the effort would be significantly less than arguing for the validity of a patent or showing that it has been infringed. In other words, no matter what the ruling, it is likely to tilt the scales in favor of those who favor freedom to innovate over the protection of intellectual property.