Up to this point, software has only been eligible for limited patent protection. The general thinking is that abstract concepts cannot be patented. The Supreme Court on Friday agreed to hear the case Alice Corporation Pty. Ltd. v. CLS Bank International.

From the SCOTUS Blog:

Alice International, an Australian company that is half-owned by the National Australia Bank Ltd., obtained patent protection on a method invented by its founder, Ian Shepherd, for exchanging financial instruments, with the aim of assuring that, when two parties have agreed to an exchange of currency or other financial goods, they actually deliver on the deal. Because such agreements are often delayed at least a few days in implementation, there is a risk that one side won’t live up to the agreement. The invented program works out a settlement arrangement to determine which side is obliged to deliver. It generates instructions to the institutions involved to carry out their agreement.

Decisions that affect the degree to which software can be patentable can have far reaching implications. Companies like Google and Netflix fall on one side, favoring looser protections, while others, such as IBM, favor more protections. As you’d expect, the Electronic Frontier Foundation opposes the current system, claiming:

Patents may have been created to help encourage innovation, but instead they regularly hinder it. The US Patent Office, overwhelmed and underfunded, issues questionable patents every day. “Patent trolls” buy too many of these patents and then misuse the patent system to shake down companies big and small. Others still use patents to limit competition and impede access to new knowledge, tools, or other innovations.

Interesting case.