Does New US Supreme Court Decision Change Game For Patent Trolling?

June 20, 2014 by Dave Haynes


The U.S. Supreme Court issued a ruling Thursday that MAY make life a little harder for companies that have been suing their way through digital signage and other software industries for the last four or five years, based on patent infringement claims.

The country’s high court ruled that companies can’t claim a software patent on an abstract idea simply tied into a computer platform.

Reports the Wall Street Journal:

A unanimous court outlined hurdles inventors must overcome to win patent protection for computer software, although it declined to craft major guidelines for when software can be patented.

The decision invalidated patents held by Australia-based Alice Corp. that had claimed a computerized invention for limiting risk in currency transactions.

Michael Sherban, a lawyer with Ulmer & Berne LLP, said the decision would affect companies across industries as they move to computerize their business processes to become more efficient.

“They must be aware now that not all of their innovations will be eligible for patent protection,” said Mr. Sherban, who wasn’t involved in the case. “A company must do more than just automate a well-known process using a generic computer.”

Thursday’s opinion by Justice Clarence Thomas said Alice’s claimed inventions weren’t eligible for patent protection because they were drawn from the abstract idea of using third parties to reduce financial risks.

That Alice implemented its risk-mitigation idea through a computer didn’t matter, the court said. “Under our precedents, that is not enough to transform an abstract idea into a patent-eligible invention,” Justice Thomas wrote in a 17-page opinion.

Software makers had watched the case closely amid concern that a broad high-court ruling against Alice could have rendered even highly inventive software patents vulnerable to attack.

BSA, a trade association representing Microsoft Corp. and other software makers, said the opinion “will help everyone distinguish abstract ideas that are not patentable from real software inventions that are.”

The decision avoided broad new pronouncements and stuck closely to precedent, but observers said it could strike a blow against a proliferation of weaker software patents.

Companies including Google, Facebook and Netflix Inc. filed a brief telling the Supreme Court that abstract software patents were a “very real and growing plague” on computer-related industries.

They said such patents have fueled infringement lawsuits by firms, known as patent trolls to their detractors, that build patent portfolios to pursue licensing fees rather than make products.

“There are a growing number of software patents that tie the application of an abstract idea to a computer,” said Timothy Worrall, an attorney with law firm Polsinelli PC. “The court is saying you have to do more than that.”

Thursday’s ruling was a victory for CLS Bank International, which had built a global network for settling foreign-exchange transactions. Alice had argued that CLS had infringed Alice’s patents.

The rejection of Alice’s patent claims would allow CLS to “continue its mission to enhance financial stability by providing risk mitigation services to the global foreign exchange market,” CLS Chief Executive David Puth said.

Alice lawyer Carter Phillips of Sidley Austin LLP said his client was disappointed but not surprised by the outcome. “The court clearly was unimpressed by the patent, and the presence of a computer as part of the invention did not change its view that the patent really just embodies an abstract idea,” Mr. Phillips said.

The case had proved a struggle for the U.S. Court of Appeals for the Federal Circuit, a specialized court that hears patent cases. The Federal Circuit also ruled against Alice but issued a splintered decision that offered no clear rules on how to judge when claimed computer-based inventions were eligible for patent protection.

MANY companies involved in digital signage – from the software and display guys to their clients (end-users) – have been subjected in recent years to patent infringement claims, primarily by an entity called Activision TV. This is the primary patent being raised by Activision TV. It has a couple of directly related, very similar ones.

Is this court applicable in the context of these cases? Definitely don’t know.

I’ve heard from no end of people who have referred to this case as a classic example of troll activity, but I also know many people who got the legal advice that the claim had some teeth and the path of least resistance for defendants was to settle.

If you have better or direct insight, please send me a note or use the comments.

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