Emerging companies often ask: “Is my idea patentable?”  Many of these ideas relate to software.  The patent eligibility of software is again a hot topic in the United States and around the world.  Recent developments in US law have made this an increasingly difficult question to answer.

In 2014, the US Patent and Trademark Office (USPTO) as well as courts in the US started using a two part test to analyze subject matter eligibility of software patent claims:

1. Are the claims at issue directed to an abstract idea; and
2. Do the claims contain “an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.”

In applying this test, the Supreme Court has stated that, without more, an abstract idea implemented on a generic computer  is not eligible to be patented. (Alice Corp. Pty. Ltd. v. CLS Bank Int’l, (Download the PDF of the decision)).

Whether such software is patentable often hinges on the first factor in this test, i.e., whether the software implements an abstract idea.  We have a few examples of what may constitute abstract ideas: fundamental economic practices, certain methods of organizing human activities, an idea of itself, and mathematical relationships/formulas.  That said, not much additional guidance has been provided.  Accordingly, it can be difficult to determine what ideas the USPTO and the courts will find abstract and what ideas will be found eligible to be patented.

As a practical matter, the USPTO has recently been rejecting business method patent applications and examination of some software patent applications has all but stalled at the USPTO.  This, however, may change after the USPTO implements revised examination guidelines that consider recent court decisions and policy changes.

One area of software that safely remains patent eligible is software that affects the operation of a computer itself.  For example, the USPTO has not been routinely rejecting patent applications for software that increases the speed of the computer or increases the security of the computer.

Moving forward, many companies with business method inventions implemented in software may want to file a provisional patent application.  A successful provisional application can provide the company with a cost-effective way to keep their options open while the USPTO settles on more permanent guidelines.  A provisional application will give the company one year to determine whether to proceed with a non-provisional patent application.  The provisional application will never become public if a non-provisional patent application is not filed.  Thus, depending on changes to USPTO policy in the coming year, the company can either file a non-provisional patent application or can allow the provisional application to expire.  If the company decides to allow the provisional application to expire, they can attempt to protect their business method algorithm as a trade secret, which is appropriate if others are unable to discern the business method algorithm by use of the product. Read more about these applications in our article, Provisional Patent Applications: Frequently Asked Questions.

Other strategies to consider when developing a company’s patent portfolio include bringing already issued patents into compliance with the more recent guidelines via a reissue application and/or delaying, where possible, addressing any subject matter eligibility rejections in pending patent applications until additional guidance is provided.  Additionally, competitors’ patents may be invalidated based on the newly adopted two part test via, for example, litigation or patent office proceedings such as ex parte reexamination or inter parties review.