WASHINGTON -- The Supreme Court on Thursday tossed out an Australian company's patent for business software in a decision that clarifies standards for awarding patents, but not as much as some firms had hoped.
In a case closely watched by the industry, justices ruled unanimously that the government should not have issued a patent to Alice Corp. in the 1990s because the company simply took an abstract idea that has been around for years and programmed it to run through a computer.
The decision makes clear that to obtain a patent, a company's idea must actually improve how a computer functions or make other technical advancements. It could also help technology firms mount a stronger defense against so-called patent trolls -- companies that buy up patents and force businesses to pay license fees or face costly litigation.
The software at issue allows a neutral third party to make sure all parties to a financial trade have lived up to their obligations. New York-based CLS Bank International claimed the patent was invalid.
"We conclude that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention," said Justice Clarence Thomas, writing for the court.
Dozens of technology firms -- including Google and Facebook -- submitted friend of the court briefs in the case, asking the high court to restrict the free flow of software patents they say are often too vague and can block other companies from innovation. But other companies, such as IBM, warned that too many new restrictions could nullify thousands of existing patents and discourage companies from investing in research and development.
John Cuddihy, a patent attorney in the nation's capital, said the court's decision offers "clarity and helpful guideposts," but "wisely tried not to over-specify the standards for determining eligibility of computer-based patents."
He said the ruling makes it easier for companies fighting patent troll litigation to argue that flimsy patents should not have been granted in the first place.
But Jennifer Spaith, a Seattle patent attorney, said the court could have offered more guidance on how patent standards should apply to the latest innovations, such as wearable technology, cloud computing and social media that are changing how people communicate and work.
"The Supreme Court did not offer tools for identifying patentable subject matter in these other intangible areas, so patentees will continue to battle uncertainty in these spaces," Spaith said.