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US limits possibilities of patent protection for software inventions

In the Alice Corp. v CLS ruling, the American Supreme Court has made it clear that the development and sale of computer systems and programs cannot be protected by a patent if it only involves a general implementation of an inventive abstract concept.

Earlier it had already emerged that working methods implementing abstract concepts using conventional steps as such cannot be protected either. This ruling throws doubt on the validity of hundreds of thousands of existing patents.

Abstract ideas and pre-emption
Alice Corp. v CLS has been ruled against a background of political criticism on ‘software patents’. But the motivation of the ruling is mainly theoretical. It is a generally accepted principle in patent law that concepts as such cannot be protected by a patent, but practical applications thereof can be protected. The Patent Act reflects this as well. Lower American courts considered the development of a computer system or program to be a practical application, and the patent granting authority (USPTO) awarded hundreds of thousands of patents as a result.

However, the Supreme Court is of the opinion that, for abstract concepts, a patent should be prevented from protecting every application, in other words, from effectively creating a monopoly on the abstract concept (pre-emption). As a result, the Supreme Court will only recognise a patentable practical application if the application adds restrictions, which form an inventive concept, to the abstract concept; in other words, in cases involving significantly more than the abstract concept. According to the Supreme Court, this does not apply to a computer implementation using conventional means. It should be about more than ‘applying the abstract concept to a computer’.

In the Alice Corp. v CLS case, risk management regarding the performance of financial agreements using shadow accounts was considered to be an abstract concept, and the computer implementation thereof was conventional. As a result, neither the development, sale nor use of the computer implementation could be protected by a patent.

Just as in Europe, the ruling does not mean that all computer implementations of inventions are now excluded from patent protection. In Europe an abstract concept as such is also insufficient for patent protection. There the protected implementation is required to have aspects with a technical character, together forming a technical invention. Computer implementation aspects may contribute to this if they yield a technical effect. The criterion of the American Supreme Court makes implementation aspects important as well, but does not require a technical character and technical inventive step. It could therefore leave more room for patent protection than in Europe. On the other hand, it is not an issue in Europe if the implementation protects all the applications, as long as it has an inventive technical character.

As a result of the invention, patent holders and patent applicants will be confronted more often with arguments attempting to isolate as much as possible of the requested protection as an abstract concept (the same applies to a law of nature or a natural phenomenon instead of an abstract concept), to state subsequently that only a general implementation is additionally being protected, as a result of which the patent will be invalid. Unfortunately the ruling does not provide any criteria for distinguishing between abstract concepts and non-abstract concepts. Perhaps that a dictionary definition such as ‘ideas that are separate from concrete objects’ will become a deciding factor. Only time will tell.