Software patents are vitally important to all companies in the high tech arena. Now an analysis by John F. Duffy — the leading patent scholar who engineered the Supreme Court strategy for the ground-shifting KSR v. Teleflex decision — suggests that the new U.S. Patent and Trademark Office position on what can be patented would “invalidate many and perhaps most software patents,” such as the search patents that Google owns.

Duffy notes that in a recent high profile case, In re Bilski:

… the Office takes the position that process inventions generally are unpatentable unless they “result in a physical transformation of an article” or are “tied to a particular machine.”[1] Perhaps, the agency has conceded, some “new, unforeseen technology” might warrant an “exception” to this formalistic test, but in the agency’s view, no such technology has yet emerged so there is no reason currently to use a more inclusive standard.[2]

In Duffy’s view, and, again, he’s one of the leading experts in this area, a general purpose computer — whether PC, server, or mainframe — is not a “particular machine,” and so no software patent could be upheld when written for one.

This is one paper you need to read, because Duffy then goes though and examines what the implications would be for Google’s PageRank technology. Not all agree with his interpretation, but with his citations of specific cases, he puts forward a very convincing argument that the patent could be overturned.

Until this question is settled, virtually all high tech companies are under very real-world risk. To get a patent, a company must publicly disclose its methods, which means opening them to competitors. If the software patent is denied or overturned, a great deal of R&D is now open for whoever would like to see and use it.

And it doesn’t take a well-heeled competitor to tip the apple cart. Last year, the USPTO tossed out most of the claims in Amazon’s One-Click patent because of a reexamination request filed by a New Zealand performer who was bored and slightly miffed at the company. I spoke with him last fall for a short piece I was writing for IP Law & Business - he even raised the $1,500 fee from donations that came through the Internet. Now even your angered customers can cause you perfectly legal trouble that could have massive ramifications.