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Supreme Court tackles software patents

Is it too easy for high-tech companies to patent inventions that are not really new but simply take an old idea and blend it with computer wizardry?

The Supreme Court wrestled with that question Monday as justices considered making it tougher for the government to issue patents for computer software.

The outcome could send tremors through an industry that touches virtually every sector of the economy, from gadgets on smartphones to advances in anti-lock brakes.

The issue has divided the nation's technology giants, with companies like Microsoft Corp. and IBM warning that new restrictions could nullify thousands of existing patents that are the product of billions in research and development. On the other side, firms including Google, Facebook and Netflix say the free flow of software patents has become a "plague" on the industry, blocking companies from promoting innovation.

The justices weighed arguments in a case involving Alice Corp., an Australian financial company that in the 1990s patented a computer program to reduce the risk in financial transactions. The software allows a neutral third party to make sure all parties to a trade have lived up to their obligations.

New York-based CLS Bank International challenged the patent as invalid, arguing Alice merely took a concept that has been around since ancient human history and programmed it to run through a computer.

Justice Anthony Kennedy suggested a bunch of second- year college engineering students could come up with the same software over a weekend.

"My guess is that would be fairly easy to program," Kennedy told Carter Phillips, the attorney representing Alice.

Justice Stephen Breyer suggested the idea was no different than when King Tut of ancient Egypt used an abacus to keep track of how much gold to give away. If businesses can simply take an abstract idea and patent it because it runs on a computer, instead of true competition, "you will have competition on who has the best patent lawyer," Breyer said.

Phillips responded that Alice's system was much more complicated, allowing multiple parties around the world to settle transactions in real time. He said the position CLS was taking meant that essentially no computer software would be eligible for patent protection. That would undercut hundreds of patents, including those that have been issued for word processing or browsing the Internet, he said.

The Supreme Court has previously ruled that abstract ideas, natural phenomena and laws of nature cannot be patented. But the court has not laid out detailed criteria for determining when computer software patents are valid.

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