US Supreme Court To Rule on Validity of Software Patents

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 conceptEUon any computer, which is, as...

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