The consequences of patent thickets are increased difficulty of innovation, complex cross-licensing relations between companies, and discouragement of newcomers from entering the software industry.
The Bilski case involved a patent application on methods for hedging against commodity price fluctuations, which the PTO had rejected.
The Supreme Court affirmed the judgment of ineligibility, in Bilski v. Kappos, but on more general, and less articulated in detail, grounds of undue abstractness.
A concurring opinion pointed out that the Court was unanimous, however, as to many issues in the Bilski case, including a rejection of the Federal Circuit's late 1990s State Street Bank decision, which allowed patents on any advance, technical or nontechnical (and in that case a numerical financial calculation of stock price changes) that produces a "useful, concrete and tangible result."
The Supreme Court's Bilski decision was criticized because of its lack of detailed guidance on how to determine whether a claim was directed to an abstract idea.
Nonetheless, it provided some clarification and affirmed the Federal Circuit's taking a new direction in its software-related patent cases.
In the first step, the court must determine whether the patent claim under examination contains an abstract idea, such as an algorithm, method of computation, a Law of Nature or other general principle.
In the second step of the analysis, the court must determine whether the patent adds to the idea "something extra" that embodies an "inventive concept."
The ruling continued with these points: The Alice decision met a mixed reception, but profoundly affected U.S. patent law.
In its wake, as explained in the Wikipedia article on the case, courts invalidated vast numbers of so-called software and business-method patents (the overwhelming majority of those the United States Court of Appeals for the Federal Circuit considered) and the number of such patents issued has drastically fallen.
The Alice decision has been widely criticized for its failure to specify in detail the boundaries of patent eligibility, but it has also been defended because its unanimity tends to stabilize decisional law in the field.
Federal Circuit Judge William Bryson summed this up in these terms: In short, such patents, although frequently dressed up in the argot of invention, simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps.
In addition, because they describe the claimed methods in functional terms, they preempt any subsequent specific solutions to the problem at issue.