Financial Software Patents and “Abstract Idea” – Focus on Technology, Not Merely Finance
The laws concerning patent eligibility for software inventions, including financial software inventions, and the concept of “abstract idea” have undergone sea changes in recent years. These changes were meant to weed out overly broad patents, but have inevitably limited or muddled the scope of patent eligibility for software inventions. In light of these changes, inventors of financial software inventions interested in seeking patent protections should not focus merely on the finance ideas, even if they are considered highly innovative, but should also focus on the implementing technology, including both software and hardware.
Software and abstract ideas
Software inventions, particularly those implemented on general-purpose computers, face an additional hurdle to be patent eligible, when compared to the other types of inventions. – Software must not be considered an “abstract idea”, which is not eligible for patent protections even if it satisfies the other patentability requirements. This is because software inventions include primarily “methods and steps” in performing a set of logical operations, which are often described and controlled solely in a high-level programming language detached from the inner working of the general-purpose computer. Such “high-level” operations of software inventions may encroach on the domains of “abstract ideas”, which are considered too fundamental and basic to human societies and activities for any one individual to monopolize by patents, even for a limited period of time.
Examples in financial software: hedging commodity transactions; reducing settlement risks
Financial software inventions are particularly susceptible to the “abstract idea” hurdle, because inventors often focus on the finance or business ideas, giving little consideration of their practical implementations, as software or otherwise. For example, in 2010, the US Supreme Court in the case Bilsky v. Kappo held that methods and software for hedging commodity transactions were “abstract ideas” and not patent eligible. Subsequently, in 2014, the Supreme Court held that methods and software for reducing settlement risks by using a computer as a third party intermediary were patent-ineligible “abstract ideas”, in the case Alice v. CLS Bank.