Clarence Thomas.
Clarence Thomas. (Photo: Diego M. Radzinschi/NLJ)

In a closely watched intellectual property case, the U.S. Supreme Court on Thursday ruled that some computer-related innovations are too abstract to be eligible for patents. But the unanimous decision stopped short of denying patents to all computer software.

The ruling is a rare affirmation by the high court of the U.S. Court of Appeals for the Federal Circuit, which usually finds its rulings reversed by the justices.

Justice Clarence Thomas, writing for the court, said a computer system that mitigates “settlement risk” in financial transactions was itself too abstract for patent protection. Merely adding “generic” computer applications did not turn the system into a patentable innovation, he wrote.

“The relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. They do not,” Thomas wrote.

The court’s decision came in the case of Alice Corp. v. CLS Bank International, a dispute over a computer system developed and patented by the Australian company Alice Corp. that is used in tracking and reducing the risk of financial transactions. CLS Bank provides similar services. The two companies have been in court since 2007 arguing over the validity of Alice’s patents and whether they are in fact “abstract ideas” that cannot be patented.

Thomas wrote that there was “no meaningful distinction” between the patents sought by Alice and those involved in the 2010 Supreme Court case Bilski v. Kappos, which found similar claims to be too abstract.

Stuart Meyer, an intellectual property partner at Fenwick & West, said after reading the ruling that “the court gave virtually no guidance as to how one could tell what qualifies as an ‘abstract idea.’ Accordingly, the potential impact of this case on other software patents is large, but significant further litigation will be needed before we see the contours of what is considered ‘abstract’ by courts.”

The Federal Circuit in May 2013 issued a splintered en banc decision in the Alice case, with six separate opinions and a “reflection” by then-Chief Judge Randall Rader in which he lamented the long-running “commotion” surrounding the issue.

Today’s decision was the sixth and perhaps most important patent case on the court’s docket this term—more patent disputes than the court has heard since the Federal Circuit was created in 1982. In all five previous patent cases this term, the justices overturned rulings by the Federal Circuit.

As the Alice case reached the high court, entities ranging from Microsoft Corp. and International Business Machines Corp. to the American Civil Liberties Union filed 40 amicus curiae briefs—some defending and others challenging patent eligibility for software, or at least for the inventions at issue in the case.

At oral argument, several justices seemed skeptical of Alice’s patents. Sidley Austin’s Carter Phillips defended Alice, while Mark Perry of Gibson, Dunn & Crutcher represented CLS Bank.

Contact Tony Mauro at tmauro@alm.com. On Twitter: @Tonymauro.