The US Supreme Court is to rule for the first time in decades on patent protection for computer software, taking up a case that has divided the industry and may reverberate through the US economy.
The justices on Friday agreed to hear arguments on a patented system for limiting the risk that one party to a derivative trade will not follow through on its obligations.
The case splintered a federal appeals court in a ruling that one judge said called hundreds of thousands of patents into question.
On one side of the debate are Google Inc, Facebook Inc and JPMorgan Chase & Co, which say patent standards for software are too lax and open companies to unwarranted lawsuits.
On the other are Microsoft Corp and Oracle Corp, whose trade group told the appeals court that limiting protection for genuine innovation could hurt the nation’s economy.
“This is going to affect virtually every industry,” said Linda Thayer, a patent lawyer with the Finnegan firm in Boston. “Nowadays, we’re in a highly connected, wired Internet world where pretty much everything is implemented by software. Where is the line where there is a true invention?”
The Supreme Court has struggled to decide what types of innovations qualify for patent coverage, generally imposing some limits without drawing categorical lines against legal protection.
In 2010, the justices divided over the rules governing patents for business methods and last year the court limited patents for diagnostic medical tests.
Most recently, in June, the court restricted companies’ ability to patent human genetic sequences.
The Supreme Court has never directly said that software can be patented, although cases in the 1970s and 1980s involved software-related inventions.
The case centers on claims that CLS Bank International infringed patents owned by Alice Corp, a company partially owned by National Australia Bank Ltd.
The software-patenting issue left the 10-member US Court of Appeals for the US Federal Circuit unable to produce a majority opinion.
A majority said aspects of Alice’s patents covering a method of performing the idea were not eligible for protection, while the judges were evenly split regarding systems to implement that idea.
The Supreme Court will hear arguments in March or April next year and rule by July. The case involves the basic question of eligibility for patent protection.
CLS argued that the lower court ruling is consistent with the policy behind the eligibility requirement: “ensuring that a patentee cannot preclude an entire realm of future innovation, while contributing very little to the development of those inventions.”