Defending the Federal Circuit, Again, on Software Patents
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: December 18, 2013 @ 2:06 pm
When it comes to the history of software patents it seems that everyone believes they are an expert. Unfortunately, few in the popular press actually take the time to get the story correct. In fact, there is a popular misconception in media that the Federal Circuit was the court that first authorized software patents. I have dealt with this nonsense in the past, and now have to deal with it once again. None other than the Wall Street Journal has published an article on the topic that is simply fiction.
The clearly erroneous Wall Street Journal article in question was published on December 15, 2013, under the title Jimmy Carter’s Costly Patent Mistake. The article, written by Gordon Crovitz, seems to take the position that patents stifle innovation, although Crovitz thesis is not explicitly stated. It would be erroneous enough to state that patents stifle innovation when all of the evidence is to the contrary, but that isn’t the major Crovitz sin in this article, although it is a whopper of a lie often told by patent critics.
Before proceeding, allow me to state what should otherwise be obvious: if patents stifle innovation you would expect run-away innovation in places where there is no patent system, but that isn’t what you see. You see extraordinary poverty, no economy and zero innovation where there are not patent rights. Likewise, you see economies established, domestic innovation and innovation from overseas flowing into countries that adopt strong patent rights. Furthermore, the entire point of a patent system is to grant exclusive rights that force creative, inventive and entrepreneurial individuals who are blocked to design around, which is exactly what happens. Designing around patents leads to enormous leaps in innovation. See Forfeiting Our Future Over Irrational Fear of Software Patents. And for those who don’t get it and erroneously state that we are seeing historic levels of patent litigation, read your history. There were close to 600 patent litigations associated with the invention of the telephone, and smart phone litigation has been but a small fraction of that number. Furthermore, the smartphone as we know it came out in 2007. In the past six years have the over abundance of patents stopped smartphone innovation? Hardly, and everyone who is at all honest knows that to be 100% true. So why the pretending about patents stopping innovation? Obviously there is real patent hatred and critics, like Crovitz, simply ignore facts and prefer their own brand of fantasy over truth.
As ridiculous as it is to suggest that patents stifle innovation, this ill-defined Crovitz thesis isn’t the major issue with the fiction published by the Wall Street Journal. There is objective and verifiable error in his article that even those with an agenda will have to admit.
Crovitz erroneously states that software was not patentable until the Federal Circuit changed the rules of patent eligibility. That is simply false. There can be no dispute or argument to the contrary. Crovitz is wrong. Had he done any research on the issue he would have easily known what he stated was false. So either Crovitz wrote this article without doing even the most basic of background research or he has an agenda — facts be damned!
Crovitz says: “the Federal Circuit approved patents for software…” He then goes on to say even more directly: “Until the court changed the rules, there hadn’t been patents for algorithms and software.”
I understand it is an inconvenient truth that the Supreme Court authorized the patenting for software, particularly for those who don’t like the Federal Circuit. Nevertheless, it is fact, and since Crovitz didn’t care enough to get it correct allow me to set the record straight and clean up this utterly nonsensical fiction.
Since the United States Supreme Court first addressed the patentability of computer software in Gottschalk v. Benson the law surrounding the patentability of software has changed considerably. Indeed, Gottschalk v. Benson was the case that started it all, and one quite frankly that the Supreme Court clearly got wrong, as evidenced by the fact that the Court retreated from the decision less than a decade later in Diamond v. Diehr.
In Gottschalk, the invention described in the patent in question was related to the “processing of data by program and more particularly to the programmed conversion of numerical information” in general-purpose digital computers. The applicants for the patent claimed a method for converting binary-coded decimal numerals into pure binary numerals. “The claims in the patent application were, however, not limited to: (1) any particular art or technology; (2) any particular apparatus or machinery; or (3) any particular end use.” To the contrary, the claims of the patent application itself purported to cover any use of the claimed method in a general-purpose digital computer of any type. It seems that this fact alone lead to the ultimate decision. This invention was far too important to be patented because it had to be used in every computer; a truly ridiculous way to look at patentability.
The Supreme Court began its analysis in Gottschalk v. Benson by recognizing that “while a scientific truth, or the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.” The Court also recalled the familiar and often cited language found in its decision in Funk Brothers Seed Co. v. Kalo Inoculant Co., “[h]e who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end.” Nevertheless, although the patent claims were truly related to a process that employed a mathematical formula to achieve the end goal, the Court held that the mathematical formula involved had no substantial practical application except in connection with a digital computer.
The decision in Gottschalk meant that it was the opinion of the Supreme Court that if the patent was valid it would completely “pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.” Of course, this was not at all true. The algorithm could have been used in other situations and circumstances, but that was a nuance lost on the Supreme Court in 1972.
Almost a decade after its decision in Gottschalk, the Supreme Court in Diehr first recognized that a computer program may deserve patent protection. Indeed, the Supreme Court explained that the issue they were deciding in Diehr was whether a process for curing synthetic rubber that incorporated a programmed digital computer is patentable subject matter.” The Supreme Court set the table as follows:
We granted certiorari to determine whether a process for curing synthetic rubber which includes in several of its steps the use of a mathematical formula and a programmed digital computer is patentable subject matter under 35 U.S.C. 101.
This quote comes directly from the first paragraph of the Supreme Court’s decision, so it is abundantly clear that the decision reached by the Court addressed the question of patentability of a process that utilizes “a programmed digital computer.” In fact, it was uncontroverted that the patent claims in question “defined and sought protection of a computer program for operating a rubber-molding press.” So when the Supreme Court ultimately determined that the claimed invention in question was patentable that necessarily meant that a process that incorporates a programmed digital computer was patentable. Thus, the Supreme Court of the United States ruled in 1981 that a computer implemented processes (i.e., software) can be patented.
In finding this software patentable, the Supreme Court explained:
[A] claim drawn to subject matter otherwise statutory does not become nonstatutory simply because it uses a mathematical formula, computer program or digital computer. . . . [A] process is not unpatentable simply because it contains a law of nature or a mathematical algorithm. It is now commonplace that an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection. As Justice Stone explained four decades ago: “While a scientific truth, or the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.
. . .
[The equation used in the claimed method] is not patentable in isolation, but when a process for curing rubber is devised which incorporates in it a more efficient solution of the equation, that process is at the very least not barred at the threshold by Section 101.
So Crovitz and all the others who over the years have written that the Federal Circuit is responsible for allowing software to be patented are simply wrong. The Federal Circuit was not created until October 1, 1982. The Supreme Court’s decision in Diehr, from 1981, predates the creation of the Federal Circuit! To all objective observers it is painfully clear that the Supreme Court authorized the patenting of software, and used Diehr as the means for explaining that not all computer implemented processes are unpatentable.
Diehr aside, Crovitz is incorrect for yet another reason. In 2010, the United States Supreme Court AGAIN determined that software could be patented. This time in Bilski v. Kappos.
Justice Kennedy wrote the majority opinion in Bilski. Unfortunately, the part that dealt with software was not joined by Justice Scalia, so only 4 Justices signed on to this part of the opinion, which requires a two-step analysis. In the “software section” of the opinion Kennedy characterized the holding in the Diehr case as follows: “a procedure for molding rubber that included a computer program is within patentable subject matter.” Kennedy also specifically stated that computer programs are not always unpatentable, which logically and necessarily means that some software is patentable. Therefore, Justices Kennedy, Thomas, Alito and Roberts all agree that software can be patented.
But what about the other Justices? This brings us to footnote 40 of the Stevens dissent. Justice Stevens was joined by Justices Breyer, Ginsberg and Sotomayor in his dissent. The Stevens footnote 40 recognized two important things. First, the State Street bank case dealt with the patentability of computer software. Second, the ultimate outcome in State Street was correct. Footnote 40 explains:
Judge Rich authored the State Street opinion that some have understood to make business methods patentable. But State Street dealt with whether a piece of software could be patented and addressed only claims directed at machines, not processes. His opinion may therefore be better understood merely as holding that an otherwise patentable process is not unpatentable simply because it is directed toward the conduct of doing business—an issue the Court has no occasion to address today.
Thus, the State Street patent claims,which unequivocally and directly related to a computer implemented process (i.e., software), were patentable in the views of Justices Stevens, Breyer, Ginsberg and Sotomayor despite being directed to a method of doing business. Thus, these four Supreme Court Justices likewise agree that at least some software is patentable.
As a result of the Supreme Court’s decision in Bilski, 8 out of 9 Justices of the United States Supreme Court agree that at least some software is patentable.
Finally, even the United States Congress has recently taken action that unequivocally shows that at least some software is patentable. For example, effective on September 16, 2011, thanks to the America Invents Act, tax strategies are in and of themselves cannot be patented. Congress, however, took a bizarre path to achieve this patent exclusion rule. Tax strategy patents are still patent eligible subject matter pursuant to 35 U.S.C. 101, but for purposes of evaluating an invention under section 102 or 103 of title 35, any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, is deemed insufficient to differentiate a claimed invention from the prior art.
The deeming of tax strategies, known or unknown, as being within the prior art does not does not apply to that part of an invention that (1) is a method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax filing, including one that records, transmits, transfers, or organizes data related to such filing; or (2) is a method, apparatus, technology, computer program product, or system used solely for financial management, to the extent that it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax advisor.
Despite the tax strategy exclusion you can still patent technologies, including software related innovations, that relate to the preparation of tax filings and the like. Thus, Congress must also necessarily have understood that at least some software is patent eligible.
So why is it that patent critics so enjoy blasting the Federal Circuit? That is a good question. However, the better question really ought to be this: If they lie about something so simple and verifiable how can you believe anything patent critics say?- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.