Abstract Ideas Don’t Deserve Patents

The Constitution gives Congress the power to grant inventors a temporary monopoly over their creations to “promote the progress of science and useful arts.” But in recent years, the government has too often given patent protection to inventions that do not represent real scientific advances.

On Monday, the Supreme Court will consider when the government should grant patents to processes that are based on abstract ideas. In a world where technology is rapidly changing, the Patent and Trademark Office has been flooded with applications that claim to have invented ways to solve problems. But it can be hard to discern if these creations should be patentable.

The number of patent applications has more than tripled in the last two decades, and the number of patents granted has multiplied two and a half times. But many of those patents appear to be overly broad and vague, according to a report by the Government Accountability Office. That increase has contributed to a surge in costly, and often frivolous, patent-infringement lawsuits.

The issue in this case, Alice Corporation Pty. v. CLS Bank International, is whether using a computer to implement a well-established economic concept can be patented. The court should rule that such ideas are not eligible for patent protection.

Alice Corporation obtained four American patents that cover a method of settling trades between investors in currency and other financial markets. The approach depends on a neutral middleman to make sure traders complete the transactions they have agreed to. The corporation, which is based in Australia, has accused CLS Bank, a London-based company that settles foreign exchange trades for investors around the world, of infringing its patents.

In several earlier cases, including one decided in 2010, the Supreme Court has ruled that “abstract ideas” and “fundamental economic practices” cannot be patented, because they are basic tools of scientific and technological activity. In the 2010 case, Bilski v. Kappos, for example, the court upheld a decision by the patent office not to grant a patent to a system that businesses could use to hedge the risk of changing energy prices. Investors have used hedging for hundreds of years to protect themselves from losses. Traders have also long used middlemen, like financial exchanges and clearing houses, to help them complete financial transactions.

Alice Corporation has argued that its patents cover a specific computer-enabled system and method, not the fundamental idea of using intermediaries in financial settlements. But CLS Bank, which first sued Alice in an attempt to have its patents invalidated, says that Alice’s system does not add anything meaningful to a basic idea.

The Obama administration argued in a friend of the court brief supporting CLS that Alice’s system merely uses a computer to do what it was designed to do — perform calculations, store information and communicate with other devices.

The Supreme Court should make clear that nobody should be allowed to claim a monopoly over an abstract idea simply by tying it to a computer.