Software Patents and Alice in the Looking Glass
Written by JGPC Business Law on April 21, 2017. Updated June 2026.
Author: Gerald R. Prettyman, J.D., LL.M.
Software patents remain one of the most complex areas of intellectual property law. While software-related inventions can still qualify for patent protection in certain circumstances, businesses and developers must carefully evaluate patent eligibility requirements and work closely with experienced intellectual property counsel.
The public tends to believe the purpose of the Patent Office is to issue patents. The facts paint a different conclusion. Typically, very few patent applications receive approval for a patent on first examination. Saying 1 in 100 would not be far wrong.
Most patent applications achieve allowance (approval for a patent) through the talents of a patent attorney. Overall, the final average is typically above 50%. Then there is software.
Until 1981, the Patent Office refused to patent software on the basis that software was not a process or article of manufacture. Then the U.S. Supreme Court ruled for the first time that a software program that runs according to a mathematical formula could be patented for a manufacturing process. Over time, software control of processes increased until software was controlling financial processes. Typically, the Patent Office rejected these applications until 1998, when the U.S. Supreme Court ruled that software for financial processes was eligible for a patent. The basis for that ruling is the first patent law, which allows a patent to whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement subject to the other requirements of law and the patent rules.
The ruling was a boon for business and society. Companies had multiple financial incentives to create software, and whole companies could exist just for creating and selling software. Without that 1998 ruling, we might still be watching DVDs instead of streamed content over the Internet.
Lower Courts Required To Add Patent Rules
The ruling, though, only said software could be patented. The court did not (as the Supreme Court never does) provide guidance on what rules would apply. Consequently, other courts had to add rules to ensure that the patent included references to computer hardware, with one court requiring the patent to apply to a “machine-or-transformation.” The U.S. Supreme Court later said the “machine-or-transformation” test should not be a focal test.
As business and societal needs grew, so did the number of computer program patents. A problem developed as computer program patents started covering business and financial operations that companies had already been performing, albeit with lesser or no computer programs. The result was that software companies could and did receive patents and then sue businesses for merely computerizing their existing business methods. These lawsuits were particularly a problem for the financial industry.
The backbone of the problem was that the patent laws and rules did not expressly cover computerized business method patents. The second and third patent laws require that an invention not be previously “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public” or an obvious combination of prior inventions. These laws are important because they mean a person in the U.S. cannot patent an invention from outside the U.S. or take parts off the shelf at the hardware store and claim to have invented the combination.
But because many of these business and financial operations were not in a printed public document, the Patent Office had a limited basis for not patenting these computer programs. In 2011, Congress attempted to address the problem with an expanded patent review program, but most patent reviews did not start until the filing of an infringement lawsuit, so the program had only a limited impact.
First Software Patent Validated For Alice
Then, in 2013, the Court of Appeals for the Federal Circuit (which considers all patent case appeals) reviewed a software patent challenge owned by a company named Alice and ruled that the patent was valid.
The challenger appealed to the U.S. Supreme Court, which ruled the Court of Appeals for the Federal Circuit was wrong because, in the view of the Supreme Court, the patent applied to an abstract idea, and as the U.S. Supreme Court had stated in an earlier case, abstract ideas are not patentable under the first patent rule. The ruling instead intensified the problem because not only is “abstract” not present in the first patent law, or in any patent law, but the Supreme Court never fully explained the meaning of “abstract.”
Regardless, the Patent Office quickly adopted the Alice ruling, such that software allowances dropped so precipitously that some people wondered whether software was at all eligible for a patent. Even so, the Patent Office approved some software program applications. Many of these cases, however, relied on dedicated equipment using the software. In essence, the patent applied to the hardware, not the software. Together with vague hints in the Alice ruling, the appearance was that the key to software being patentable required something tangible outside of the computer.
2017 – Court Rules A Software Program Is Patentable
In March 2017, the Court for the Federal Circuit ruled that a software program was patentable for seeking to protect the application of physics (electronic signals) to hardware (sensors). To bolster its position, the court cited the same 1981 U.S. Supreme Court case upholding a ruling for a patent on a computer program used to control manufacturing equipment.
The essence of these cases is that software programs by themselves are not patentable because programs running code (algorithms), and algorithms are not tangible, to wit, they are abstract. If, though, the code (i.e., the processor) controls, reads, or tracks something tangible outside of the processor, be those sensors, machines, or even packages, the patent application meets the test. In the simplest terms, if a person can see something, that thing is tangible.
In 2017, a court turned time back for software to the machine-or-transformation test, thus putting a mirror to Alice’s looking glass. So, if you are a programmer or know a programmer, the good news is that there is a chance for a patent. We need only look back into the looking glass.
Gerald R. Prettyman is Patent and Intellectual Property Counsel to J.G., PC., Business & Corporate Law. Mr. Prettyman earned his law degree with a Certificate in Intellectual Property with Distinction and a Master’s degree in Intellectual Property.
Frequently Asked Questions
Can software be patented?
In some situations, yes. Software-related inventions may be eligible for patent protection if they satisfy applicable patent requirements, including patent eligibility, novelty, non-obviousness, and adequate disclosure.
Why are software patents more difficult to obtain?
Software patents are subject to additional legal scrutiny because courts have ruled that abstract ideas, mathematical formulas, and certain business methods are not patentable on their own. Determining whether a software-related invention qualifies for protection can be complex.
What is the Alice decision?
The Alice decision is a 2014 U.S. Supreme Court case that significantly affected software patent eligibility. The ruling established a framework that courts and patent examiners use when evaluating whether certain software-related inventions are directed to patent-eligible subject matter.
Can software companies still obtain patents today?
Yes. Software patents continue to be issued by the U.S. Patent and Trademark Office. However, successful applications often require careful drafting and a clear explanation of the technological innovation involved.
Why should software developers consult a patent attorney early?
Early legal guidance can help identify patent opportunities, avoid costly filing mistakes, assess patent eligibility concerns, develop intellectual property strategies, and improve the likelihood of obtaining meaningful protection for valuable innovations.
invention, patent attorney, software