The judicial basis for software patent eligibility is found in the 1981 case of Diamond v. Diehr, in which the Court said that a patent "could be granted for an industrial process that was controlled by certain computer algorithms." Consequently, the PTO has used this case as a precedent for allowing patents on algorithms and techniques. The PTO's stance on patents for algorithms and techniques has increased the granting of software patents.

Diamond versus Diehr, 450 U.S. 175 (1981), was a 1981 U.S. Supreme Court decision which held that controlling the execution of a physical process, by running a computer program did not preclude patentability of the invention as a whole. The high court reiterated its earlier holdings that mathematical formulas in the abstract could not be patented, but it held that the mere presence of a software element did not make an otherwise patent-eligible machine or process un-patentable. Diehr was the third member of a trilogy of Supreme Court decisions on the patent-eligibility of computer software related inventions.