Software patents: US Supreme Court needs to clear the air

Granting a patent involves three important criteria – novelty or inventive step, non-obviousness and utility. Also, the inventor is expected to enable the invention so as not to simply apply to be granted a patent for an idea alone. It is quite sensible that patents are not granted for abstract ideas, but it has been a matter of serious debate, and thereafter commercial exploitation in the terms of exclusive rights to patent holder, in the United States and for the last 15 years or so, the American courts have tilted heavily in favour of granting a patent for software if it involves a practical application.   

With this rationale, a large number of patents have been granted in the US for software, and also business methods, primarily owned by large multinational corporations. Indian patent regime is not that liberal. In the recent past, the computer technology, as well as the mobile phone business, has seen excessive usage of patents held by different companies, which often compete with each other. Cross-licensing of patents is the new norm in the business and it is almost impossible to think of a new product like a smart-phone or a tablet which any company can manufacture on the basis of the patents owned by the company alone. Even as the company tries to do that, the final product would not be equipped with a large number of standard features which any ordinary product in that category comes loaded with, and in likelihood, will be ignored by buyers.

In this context, an Australian company – Alice Corporation – holding a software patent, is fighting a bitter legal battle with an American bank – CLS Bank – for the last six years, which may possibly come to an end this year with a judicial pronouncement by the American Supreme Court. The entire world is watching with great hope that the Supreme Court will finally clear the air regarding software patents in the United States, which surely will go a long way in providing some sort of understanding and direction to a large number of companies doing software business or other related businesses throughout the world.

The issue is simply interpreting again the black-letter patent law as to what things can be patented in the United States and what cannot be patented. In case the Supreme Court decides in favour of software patenting and maintains the status quo, business will continue as usual and large companies with deep pockets, in all probability, will continue getting mathematical algorithms patented by coming up with certain clever though extraneous practical application and using the services of highly specialised patent attorneys to somehow get a foot into the door of patentable subject matter. It will, however, give a new lease of life to what a good number of experts call as stifling innovation rather than encouraging small inventors and innovators, defeating the very purpose of the patent law.

In case the Supreme Court decides against software patenting, it would sound the death knell of enormous business all over the world. New rules of the game will be written as a lot of intellectual property owned by different companies would simply become zero in value. Experts and commentators who opine that American patent regime has in the last couple of years surely swung to the wrong extreme of the pendulum with the grant of ridiculous patents being exhibited very commonly would undoubtedly be very pleased. No tears should be shed.

What are the implications for India? Software companies in India depend very heavily on business from the United States and such a major decision from the United States Supreme Court is surely going to change the business landscape, making it necessary to come up with new strategies and align business strategy with legal strategy. Whatever the decision, it would not be possible for Indian businesses to ignore it. It’s going to be one of the good opportunities for the Supreme Court to clear the air and not to give confused message as was sent in the Bilski case in 2010 regarding business method patents.

Clarity and predictability are expected.