US law on software patents is as chaotic as it's ever been. In May, the US Court of Appeals for the Federal Circuit, which takes all patent appeal cases, agreed to have an important case about software patents, Alice Corp. v. CLS Bank, heard "en banc" by the full court (10 judges at the time).

That produced one of the most splintered rulings ever to come out of the court. The ten judges hearing the case issued seven different opinions. None of those opinions gained a six-judge majority, so the ruling produced no binding precedent. It also showed how the Federal Circuit was all over the map when it came to software patents.

Today, the Supreme Court said it will step in to bring some order to that chaos. The court has accepted Alice Corp.'s petition and will be hearing the case sometime next year.

In the Federal Circuit's decision, five judges saw Supreme Court precedent as guiding them toward a path that would narrow what kind of software and financial services are allowed to be patented. They saw Alice Corp.'s patent on a method of using "shadow accounts" in foreign currency exchange as being the kind of "but do it on a computer" patent that should be thrown out under Supreme Court guidance. "Abstract methods do not become patent-eligible by being clothed in computer language," wrote Judge Alan Lourie.

The Lourie group agreed with CLS Bank, which accused Alice of essentially seeking to monopolize the idea of escrow. Another judge in the group had described the Alice Corp. invention as "literally ancient."

Their views conflicted with a four-judge group led by Chief Judge Randall Rader, which used the Alice Corp. case to make a full-throated defense of software patents. "A computer without software gathers dust, not data," wrote Rader. The Alice Corp. inventions were not too abstract for patenting in his view.

Rader took the court's inability to find common ground to heart. At an October meeting of IP lawyers, Rader called the fractured CLS v. Alice opinion "the greatest failure in my judicial career.”

Path to the Supreme Court

The en banc decision meant that the patent holder Alice Corp. would lose its case, and the lower court ruling would stand. Alice petitioned the Supreme Court to take its case—and it got some unusual supporters.

The Electronic Frontier Foundation has advocated to limit broad software patents, but in this case it agreed with Alice that the Supreme Court should consider the case. However, the EFF also argued that an even better case for considering the issues surrounding software patents would be the Ultramercial case, which also featured a patent nonetheless considered non-abstract by the Federal Circuit. The Ultramercial case is about a patent for online ad-viewing, and the EFF has been blasting away at it for years.

The US chapter of the Institute of Electrical and Electronics Engineers also filed a brief arguing that the high court should take the case, saying that the Supreme Court needs to clarify its own conflicting precedents about what can be patented.

No matter what happens here, a Supreme Court hearing will certainly lend more clarity to the issue of software patents. After the May decision in this case, there's really nowhere to go but up.

Getting bad patents kicked out on the grounds that they are "abstract" is important to many technology company defendants, especially ones on a smaller budget. Winning on so-called Section 101 grounds means that a defendant often won't have to pay for costly discovery and expert reports. One big recent example: expanded Section 101 case law allowed FindTheBest to win its case against a "patent troll" in relatively short order.

Supreme Court decisions in recent years have mostly limited the power of patents. The Bilski case and Mayo v. Prometheus both narrowed the scope of what kinds of inventions can be patented and found that the Federal Circuit had been allowing patents on abstract ideas.

The fact that the Supreme Court is taking this case suggests that at least several justices are still upset about how many software and business method patents are being allowed into court. The fact that they've taken up Alice v. CLS sets the stage for what could be a major showdown over software patents.

It isn't crystal clear that the Supreme Court approves of software patenting in general, although the idea that they would outright ban software patents seems unlikely. Justice Stephen Breyer made comments as early as 2007 indicating that for him, the idea that patents on pure software should be allowed isn't a decided issue.

However, since then, two other justices who were decidedly skeptical about broad patents, John Paul Stevens and David Souter, have retired. There's no telling how Alice v. CLS will turn out, but it will probably be the technology court battle of the year.